Cincinnati Issue 4: Voters say loud no to pension reform

CINCINNATI -- Cincinnati voters overwhelmingly rejected Issue 4, a major overhaul of the city’s troubled pension system, in Tuesday’s election.

The vote was 78 percent against and 22 percent for.

Peter McLinden, Cincinnati-area Regional Director at AFSCME Ohio Council 8,  released this statement:

"Today's vote will be heard beyond Cincinnati and sends a message for those on the ideological extremes who think it is ok to impose their agenda on an entire city. Had this passed, outside money and political extremists would have cost Cincinnati taxpayers more money, with less services. ...  That said we all are dedicated to working together moving forward to fix the pension system in a way that is in the best interest of Cincinnati public employees and taxpayers."

A private group known as the Cincinnati for Pension Reform Committee gathered enough signatures last summer to place a charter amendment on the ballot.

The amendment would have required the city to pay off its $872 million unfunded liability in the current pension system within 10 years.

If the payoff couldn’t be achieved under existing budget conditions, the amendment would have required Cincinnati officials to create new revenue or find cost savings so the goal could be met.

In addition, the amendment would have:

>  Changed City Hall's public pension plan for newly hired employees from a defined benefit plan to a defined contribution plan.

> Imposed contribution caps for the city and made cost of living adjustments compatible with actual increases in the Consumer Price Index, with a cap at 3 percent annually.

Workers and retirees at City Hall have been covered under the Cincinnati Retirement System, which is a defined benefit plan administered by the city.

Cincinnati’s pension plan has a large unfunded liability, due mostly to the economic crash of 2008 that affected the system’s investments, along with rising healthcare costs.

An unfunded liability occurs when pension obligations to retirees must be paid out of current income rather than from a separate fund that has been contributed to over time.

The group pushing the charter amendment had three members – Dan Lillback, Bill Moore and Burr Robinson - and ties to the tea party movement. It was similar to pension reform efforts that have been tried by the tea party in other states.

In a rare show of unity, the Democratic, Republican and independent members of Cincinnati City Council opposed the amendment. The proposed reforms would actually worsen the city’s financial situation, they said.

That’s because the problems with the pension system stem from benefits paid to retirees, not current employees.

Raising enough cash to pay off the liability in a decade would require steep cuts to city services or an increase in taxes, opponents said. Most tax increases would need voter approval, however, causing a quandary if the measures were rejected.

Further, city workers aren’t covered by Social Security. If the benefit for workers isn’t large enough under the proposed system, the city might lose its Social Security exemption and be forced to start paying into it, opponents said.

Supporters said the fears were unfounded.

The Social Security exemption may be retained if contributions from the city and an employee total at least 7.5 percent of the employee’s salary, supporters said.

Despite the pension reforms made by City Council in 2011, the unfunded liability increased from $728 million in 2011 to $862 million in 2012.

The debt has one over-riding cause, supporters said: In the early 2000s, City Council promised lucrative retirement benefits to  employees and failed to pay for them.

City leaders are either unwilling or unable to make the difficult choices needed to solve this problem, supporters added.

Cincinnati’s $2.1 billion retirement system covers 4,400 retirees or surviving spouses; there are about 2,900 active employees who pay into the system.

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