How City Can Save Money: Fiscal task force proposes an array of changes
April 25, 2010
Hartford, like the state, is in dire fiscal straits and must change the way it does business. The city at least has a blueprint to work from.
In the fall, the city council named a fiscal analysis task force to study ways to reduce spending and increase revenue. In a March 26 report, the task force proposed "long-term systemic changes" in five areas: health care, pensions, procurement, contracting and shared services.
The need to embrace fundamental change was underscored by Mayor Eddie A. Perez's recent budget presentation. Mr. Perez proposed a $554.3 million budget for fiscal 2011, an increase of almost $20 million over the current budget and one that will require a 5 percent tax increase. The tax increase is expected to bring in about $19 million in revenue to help close an estimated $27 million shortfall, with the rest coming from a variety of cuts and refinancing measures.
Budget Still Growing
The proposal by Mr. Perez is disappointing. Though some cuts have been made, the budget has risen every year since 2002-03, when it was $422.4 million. Hartford has the highest unemployment rate in the state, 16 percent in March. Many residents who are working haven't seen a raise in years. Residential taxpayers also will have an additional 3.5 percent tax increase due to the phase-out of a surcharge on commercial property. The city cannot keep raising taxes and expect people to stay and pay.
Thus, it is imperative that the council strongly consider the task force recommendations.
In the pension area, the task force recommends that the city explore a defined contribution plan, rather than the current pension or defined benefit plan, because it would be less expensive and more predictable. Though the pension funds have been well managed over the years, the down market and generous pension provisions of recent decades threaten to, as the task force put it, "overwhelm the city's ability to pay."
The pension commission estimates that the city must make an $18 million contribution next year and $30 million the following year to keep the pension fund fully funded, as is required. As an example of why the money is needed, the city is still on the hook for often lavish retirements allowed under the pre-1999 police contract. Thanks to a mix of salary, overtime and private job income and cashing in sick days, many patrolmen with salaries in the mid-$60,000s retire after 20 years with pensions that are much higher, sometimes in the low $100,000s. Since many retire in their mid-40s and will live another 30-40 years, the cost to the pension fund can be millions of dollars per officer. The city cannot afford it.
Retirement benefits have been tightened in subsequent contracts. For example, officers hired after 1999 must work 25 years for full benefits.
Other Places To Save
In health care, a huge expense to the city, the task force observed that claims by city employees average $4,200 a year, above the industry average of $3,500. The report urges that the city engage experts to study the current system, evaluate the possible use of health savings accounts, and increase employee contributions to health coverage.
Other recommendations include automating the procurement process and hiring a purchasing agent; reviewing the impacts of the living wage ordinance on city contracts, notably the school bus contract; look into more sharing of services between city government and the school board (such as building maintenance); and explore the advisability of joining the Capitol Region Council of Governments' shared service projects.
There may be other savings to be had. The city should begin to look at things such as police and fire work rules and schedules, to see if these make economic sense. Someone should review the use of city-owned cars.
The task force urges the city in the right direction. Many of the changes it recommends must be negotiated with the city's bargaining units. We hope the unions will engage these issues with the understanding that the old order is changing — that we are entering an era when government needs to be smaller and more efficient.
Reprinted with permission of the Hartford Courant.
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