Owen Courreges: The steak-dinner pension plan

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Owen Courreges

Just a block over from my house is Mr. John’s Steakhouse. In my humble opinion, it offers the best steaks in the city. They use only the finest cuts seared in butter and cooked to perfection. And of course, like all of the finest steakhouses, they are not cheap. Mr. John’s is synonymous with special occasions.

This is not, however, the case for the Board of Trustees for the New Orleans Firefighters’ Pension and Relief Fund. Apparently, they believe in spending thousands of dollars at a time at Mr. John’s and other expensive restaurants in the city.

Thanks to stellar investigative reporting from Fox 8’s Lee Zurik, the people of New Orleans have been exposed to the depraved depths of the waste of the Firefighter’s Pension Board. Apparently the board has more credit cards than board members and more than twice the number that the city has. The bills placed on these cards reflect a complete disregard for the entity being billed – a public pension fund.

The litany of horribles doesn’t stop there, though. The Firefighters’ Pension Fund has invested in risky local projects, pyramid schemes, hedge funds in the Cayman Islands – basically all the blatantly stupid investments that your crazy Uncle Ed recommends at family gatherings. Worse, the fund has been spending more than $600 per year per member in administrative costs. That’s several times what is typical of public pensions.

In short, the Board of Trustees for the Firefighters’ Pension Fund is irredeemably evil and stupid. Stuffing pension money in soiled mattresses would be a better investment plan than using these knuckleheads.

So what should we care? Well, if the pension fund were adequately funded by its members, this would be more of an internal matter for New Orleans firefighters, who elect all the Board of Trustees from their present and former ranks (save for the mayor and finance director who are automatically on the board). However, the pension fund has never been adequately funded and the board has seen fit to squander even its meager assets.

The result? New Orleans taxpayers have been footing the bill for the shortfall.

Last year, nearly 10% of our general revenues went to shoring up the Firefighters’ Pension Fund, a whopping $54.1 million. If you want to know why your street can’t be repaved, your parks are overgrown and every other streetlight is out, this is the reason. We can’t afford to have a tenth of our budget tied up in a pension that should fund itself.

And in the midst of this firefighters’ pensions are absurdly generous and employee contributions are minimal.
The source of these pension woes are being felt across the country. The problem is that while the private sector saw the writing on the wall and did away with defined benefit pension plans, the public sector continued to embrace them and has been slow to enact meaningful reforms.

Defined benefit pensions worked when people lived shorter lives and a large share of workers never retired. The ratio of those paying to those drawing was balanced enough to keep the pensions balanced. Now, that has changed. Thus, previous generations have passed bills on to present taxpayers who can’t afford them, and who frankly shouldn’t be obligated to pay them.

The worst part of all of this is that the people who are really to blame for all of this are dead. They’re laughing at us all the way from the grave (I’m looking at you, Chep Morrison!). The present spate of firemen, including those near retirement, have endured poor facilities and low pay with the expectation of receiving a gold-plated pension. Alas, the pension was a lie. It wasn’t funded. It was just an incentive worked out between short-sighted, corrupt labor representatives and venal, self-serving politicians. Like “Wimpy” from the “Popeye” cartoons, they said “I’ll pay you Tuesday for a hamburger today.”

The question is how we work all of this out and avoid leaving retired firefighters without a pot to, well, you know the rest. Alas, it is inevitable that benefits will have to be cut and employee contributions will have to rise. However, to the extent the city is underfunding firefighters’ salaries, part of the solution may be to require greater contributions but simultaneously provide higher pay.

The board itself, of course, needs to be completely overhauled. There can no longer be a system where the board spends money like a drunken sailor and invests like one too. There needs to be more oversight and tougher constraints.

Unfortunately, despite efforts by the governor and the mayor to reform firefighters’ pensions, the issue has become a third rail and been kicked down the road yet again. However, this is a budgetary time bomb. It cannot wait. The longer we delay, the more painful it will be.

Owen Courrèges, a New Orleans attorney and resident of the Garden District, offers his opinions for UptownMessenger.com on Mondays. He has previously written for the Reason Public Policy Foundation.

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