NEW ORLEANS — An Orleans Parish Civil Court judge recently ordered the city to immediately pay $17.5 million in pension obligations to the firefighters’ pension fund.
Judge Robin Giarrusso wrote that the city must “immediately budget, appropriate for and pay to the New Orleans Fire Fighters Pension & Relief Fund” $17,524,329. That payment must include interest from the date of the order, according to Giarrusso’s court order.
While the court order was signed March 28, it only became public Monday.
The order to pay the pension obligations comes as the city is facing several other multimillion-dollar expenses, including a consent decree for the New Orleans Police Department and the Orleans Parish Sheriff’s Office.
Mayor Mitch Landrieu has said that being forced to pay both consent decrees would require drastic cuts, including layoffs of police officers and firefighters.
Ryan Berni, a spokesman for Landrieu, said the city will file a motion for a new trial “on the grounds that the ruling is contrary to the law and evidence.”
Though the city presented legal and financial arguments about why it should not be forced to pay the money, Giarrusso cited state law that says the city must properly fund the pension system each year on a financially sound basis.
Giarrusso wrote that when the city did not appropriate the required contribution three years ago, the pension board’s secretary-treasurer, Richard Hampton, told the Landrieu administration about the lack of funding.
Knowing that, Giarrusso wrote, the city “proceeded to knowingly continue deliberate underfunding into the 2012 fiscal year … while fully funding other retirement systems.”
Giarrusso wrote that the fund is now only 33 percent funded. The city’s argument that the fund has $175 million in assets “ignores reality,” she wrote.
In 2010, the city contributed $10.6 million of the $13.9 million required that year, according to a report by the Bureau of Governmental Research. In 2011 and 2012, the city contributed $11.4 million each year, below the $23.9 million and $28.9 million required, according to the BGR.
Though the BGR report found many of the public sector pension plans in the local area, including for firefighters, more generous than those offered to employees in the private sector, the problem of the firefighters’ pension cannot be ignored, it said.
“By underfunding the plan, the city is expanding the gap between the … fund’s assets and liabilities,” the BGR wrote in its November 2012 report on local pensions. “It is pushing the funding burden further into the future.”
Despite the existing court order and how Giarrusso interpreted the law, Landrieu is hoping that the state Legislature will approve a series of bills that would change how the firefighters’ pension system operates in the future.
The mayor has said the firefighters’ pension fund is too expensive and costs the city about $50 million a year, is only funded at 40 percent and has suffered poor investments, prompting him to ask the state to take action. The Legislature created the pension fund, meaning only its members can make changes to it.
State Rep. Kevin Pearson, R-Slidell, chairman of the House Retirement Committee, filed four bills that deal with the pension fund.
One bill would reduce the number of firefighters pension board members from 10 to five, bringing the pension board under local control. The city has said that change would create a balance between current and retired firefighters and include a financial expert from the city.
Another bill would increase member contributions from 6 percent to 10 percent. The city has said that is more in line with other retirement systems, including the New Orleans Police Department. The city also wants all firefighters, regardless of years of service, to continue to contribute a portion of their salaries. Right now, firefighters on the job for more than 20 years do not need to contribute anything to the pension fund.
Right now, firefighters’ final average retirement compensation is based on their highest four consecutive years of employment with the New Orleans Fire Department. The third bill Pearson filed would increase that time frame to five years.
The fourth bill Pearson filed would allow the New Orleans City Council to establish and manage a new firefighter retirement system and allow that system to assume the assets of the existing fund. That would mean the Legislature would no longer have to approve changes to the pension board’s operation.
Landrieu has said the proposed changes could save the city $2 million a year if approved.
City Council Vice President Jackie Clarkson, who serves as chairwoman of the council Budget Committee, said Tuesday that the court forcing the city to pay nearly $18 million it does not have would be “devastating.”
The bills that will be discussed in Baton Rouge are the only way to ensure that the funding shortfall does not happen in the future.
“That’s what it’s going to take for them to not be penalized,” Clarkson said.
Nick Felton, president of the local firefighters’ union, said that he hopes the city will meet with his group in an effort to work out an agreement regarding payments.
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