In the early 2000s, the City’s pension plan was nearly 100 percent funded. But thanks to poor investments (including the 2008 market crash) and policy miscues, the funding now sits at a paltry 61 percent and the debt is accelerating. Between 2012 and 2013, the unfunded liability rose by nearly one-fifth. According to a consultant for the Cincinnati Retirement System’s Trustees, if left unaddressed the burden will only worsen through 2042, when it will be a mere 40 percent funded.
By doing nothing on pension reform, the most at-risk Cincinnatians stand to lose out first. As the public pension program devours an ever-greater share of receipts, government services are almost certain to be starved. The pressure to raise taxes will also be greater, making the City a more expensive place in which to reside. As Chicago Mayor Rahm Emanuel famously declared, “Without pension reform, we’ll be forced to mortgage our children’s future to pay for our past.” Meanwhile, City workers themselves would have less certainty for their own financial futures.
Next week, Cincinnati voters have a chance to address these pension problems at the ballot box. Issue 4, a Charter Amendment Petition, would enroll new City employees in a defined contribution plan, rather than the current defined benefit plan. The amendment would also put in place contribution caps for the City, keep cost-of-living adjustments honest, and stipulate that City employees do not receive paychecks and retirement checks at the same time. These common-sense reforms would be a step in the right direction, and would help ensure that the City does not follow Detroit down the road to financial ruin.
Cincinnati’s downgrade and growing pension debt should serve as a warning sign to lawmakers and taxpayers: without major reforms such as transitioning to defined contribution plans, the City faces a daunting road ahead. Fortunately, a saner course is available, one in which everybody, in and out of government, regardless of political party, has a vital stake. Issue 4 may not be perfect, but we urge Cincinnatians to consider the cost of delay. Time is not on the side of this great city.