RH Jones, Dave Speas and some tough funding issues

From Dave Speas, June 4, 2010
Subject: Re: Another twist...suing the state for failure to fund the STRS

To All,

I am a retired teacher and certainly understand the need to find a way to fund the COLA, especially for those who retired longest ago, and the medical component. I also sit on a local school board and wonder if the players in all this understand the pressures on local taxpayers at this time.

In our case, we have a levy coming up in 2012 and two more in 2013. If we pass all the levies as renewals, we will be $1.3 million in debt without major cuts. Since 80% of our budget is salaries and fixed charges and we have no control over gasoline, electricity, gas, and daily costs, and we really only control 6% of the budget outside of all of the above, we are going to have to ask for replacement levies, cut staff, or close a building which will reduce staff along with the closing.

We have been told to expect from a 6% to 22% cut from the state since they are $8 billion in debt. That means we could be $2.6 million in debt by 2012 when we go to our voters.

Cutting teaching staff means less going into the STRS pension coffers and will negate the 2.5% raise in our costs and run us more deeply in debt. It is possible that by 2015, only 12 school districts in Ohio could be in the black if the cuts from state aid continue to diminish funds and voters continue to turn down replacement and new funding levies.

I believe the state is to be a partner in the education funding for all the children in Ohio. The economic downturn has put all education entities in cutback roles as we have cut a million dollars out of our budget in the last 18 months and are fighting to not cut into the educational muscle of a district that has been deemed excellent three out of the last four years.

As a board, we have discussed the dilemma we find ourselves in and have not spoken out negatively about the raise in retirement costs we may be asked to assume. However, it will be very difficult to explain it to our voters when many of them have lost jobs, taken cuts in pay, and find their paychecks frozen.

I only send this to make it clear that this is going to be a tough sell to boards across the state and to teachers who are coming to ask for a raise and find us without funds to reward them for hard work and dedication to our students. We have no money for raises this year as we are in deficit spending and have been for two years as we continue to cut into our education programs.

We must hope and pray for an economic rebound or our schools will be offering state minimum programs at a time our leaders are asking for 21st Century educational standards. How you do that on bare bones funding is a mystery to me.

With respect,

Dave Speas

From RH Jones, June 4, 2010
Subject: Another twist...suing the state for failure to fund the STRS

John and all:

Under the same reasoning, as an average person, it seems to me that the state may be, at this point in time, legally responsible to properly fund our STRS with an employer increase. After all, it has been well over 20 years since the legislature has increased the employer contribution rate. In the meantime, the OH STRS has had inflation to deal with; and, our retired teacher HC/Rx has gone up in price drastically, all the while the STRS cut spousal and dependent care. Also, our simple 3% COLA just can not keep up either.

For Ohio, the economy is recovering, albeit slower than most Ohioans would like; nevertheless, a modest employer increase would show good faith and avoid any expensive "failure to fund" trips to the courtroom.

This is my thinking,

RHJones, retired STRS teacher member.

From John Curry, June 4, 2010
Subject: Here's a new twist.....suing the city for for failure to fund the retirement system!

http://weblogs.baltimoresun.com/news/crime/blog/2010/06/unions_sue_city_allege_systema.html

Baltimore Sun, June 3, 2010
Unions sue city, allege "systematic underfunding" of pension system

[UPDATE, 5:40 p.m.: Here is Julie's initial report, in which the unions claim the current situation is "not an accident, and 10 years does not a crisis make."]

The city police and fire unions filed a lawsuit today against the city in federal court, alleging the mayor and finance director have for years "breached its contract with its police officers, firefighters and retirees by systematically underfunding" the retirement system. Our City Hall reporter, Julie Scharper, is sifting through the 57-page complaint, but here's the union's press release in the meantime:

"After Bringing Several Solutions to the Negotiating Table, Fire & Police Forced to File Suit Against City

City has violated its contractual obligation"

Baltimore, MD—June 3, 2010—Baltimore City has breached its contract with its police officers, firefighters and retirees by systematically underfunding the Fire & Police Employees’ Retirement System (F&P Plan). As a result of its own actions, the City now claims that it must consider Bill 10-0482 and other legislation that would drastically reduce the benefits already earned by members of the F&P Plan that are guaranteed under Article 22 § 42 of the Baltimore City Code. The City’s decision to break its promises has forced Baltimore’s police officers, firefighters and retirees to bring this matter before a Federal Judge.

“For more than a year now, the police and fire labor organizations have submitted proposals to address the funding problems of the F&P Plan, to no avail. Despite filing this lawsuit, the police and fire labor organizations remain committed to continuing discussions with the City,” said Robert Cherry, President of the Baltimore Fraternal Order of Police.

Over the past 14 months, the City has ignored numerous attempts by fire and police representatives to negotiate a compromise. Litigation appears to be the only remaining option. One of the key issues has been the City’s desire to take away the variable benefit in the F&P Plan, which provides periodic benefit increases for retirees. Fire and police representatives have offered to negotiate modifications to the variable benefit in exchange for cost of living increases, which would offer the City an immediate savings of $65 million for the end of FY 2010 and long-term savings.

Baltimore’s public safety workers contribute 6% of each paycheck to the F&P Plan. The City is also required to contribute to the F&P Plan, but for the past decade it has contributed far less money than was recommended by the F&P Plan’s actuary, even though the City had budget surpluses in some of those years. The City’s underfunding has left the F&P Plan in a grossly underfunded state.

“Year after year, City officials have ignored the recommendations of the F&P Plan’s own actuary, hoping that a day of reckoning would never come. By doing so, the City gambled away the funding of our members’ hard-earned pension,” stated Bob Sledgeski, President of Baltimore Fire Fighters Local 734. “The City has broken its contractual obligations to the fire and police workers of Baltimore. But what is more disheartening is that the City has broken its promise – the moral obligation to support those who have served and protected its citizens.”