After nearly a year of negotiations, Cincinnati and its public workers have reached an agreement that aims to increase the sustainability of the city’s pension system.
The city will contribute significantly more money to the pension system. In exchange, retirees will not see a cost-of-living adjustment for the next three years and will see smaller COLAs in the years after.
The terms of the agreement, from the Cincinnati Enquirer:
Under the agreement, the city will:
* Contribute $38 million to the pension system next year. The city will do that over the next seven years by borrowing against future revenue.
* Contribute $200 million in 2016 from the financially stable retiree heath care trust fund to the pension system.
* Make a larger contribution to the pension starting in July 2016 – 16.25 percent of the annual operating budget compared to 14 percent – and continuing for 30 years.
* Take a three-year cost of living adjustment holiday.
* After that, the cost of living adjustment for both current retirees and active employees will go to 3 percent simple interest. Most current retirees receive an increase that is “compounded,” meaning the previous year’s increase is included in the following year’s calculation. Current employees already have a 3 percent simple COLA in place when they retire. The total cost of the cut was unclear Tuesday night, but can be projected. It is a significant amount.
More background and reaction from the city and unions, from the Cincinnati Enquirer:
Nobody walked away happy – not city officials, not current workers and not retirees – but everyone agreed it was a fair compromise.
The agreement ensures pension benefits will be sustained for current and future retirees and shores up the city’s financial position for years to come.
“I want to thank all of the parties for coming to the table and hammering out a compromise,” Cranley said. “It’s been a rough road and no party got everything they wanted. This settlement requires some sacrifice on all sides, but it will help strengthen the city’s financial health and ensures the pension system will still be there for everyone in it.”
The deal averts cuts to basic services for all Cincinnati residents.
Cranley, flanked by city union leaders and other top city officials, announced the agreement on the steps of the University Club at 10:45 p.m. Tuesday. All parties had been inside, negotiating since 1 p.m.
“We’re elated,” said Pete McClendon, the former president of AFSCME who is now the president of the Cincinnati AFL-CIO (of which AFSCME is a part). “The agreement stabilizes benefits … in a way that is fiscally responsible. We look forward to a workforce that can retire with dignity.”
The city’s unfunded pension liabilities hover near $862 million.