While perusing this year’s Gainesville City Budget’s summary document, I found an interesting fact. It is fairly plain language that even a window cleaner can understand. Therefore, I pass it along to you, the other citizens who are on the hook for the high cost of government. It’s a paragraph found near the top of page 10, and here is the important excerpt:
“Pension obligations are met primarily through three sources of funds. Employee contributions to the fund are set at a fixed percentage of pay. Investment returns on pension assets comprise a substantial portion of pension funding, and the balance of funding required comes from contributions from the employer. Therefore, poor investment return years require higher contributions from the employer to meet required funding levels.”
In case you are missing something here, we, the taxpayers, are the employers. The other important thing to notice is that you, the employer, are obligated to meet funding obligations when investments have a bad year. So, all of you who took a hit in 2008, losing about 40% of your retirement investments, have to bite the bullet to keep the city pension fund from failing to make money.
Keeping in mind that this is, after all, a defined benefits plan, we will not get into the details of whether such an expensively insured plan is mitigated with below average return on investment anyway. But it does indicate that the city should hire employees and create new departments only when the gravest need arises. There are not many companies that can survive not only an economic downturn, but having to insulate its employees from this effect with money it no longer has.
City employees who like this arrangement (and who wouldn’t?) should want to insure this arrangement’s long term viability by helping its employer to NOT incur deficits. But deficits are what we have, and that could be the case for years to come if we do not get some hard-times discipline.
Stay tuned to this blog as I visit other budgetary challenges that could be met with your money and your lack of opportunity.