Iowa public pensions on shaky ground8/30/2013
Public pensions in Iowa may be in a much deeper hole than previously thought.
A new Moody’s Investor Service report shows the state portion of unfunded liabilities in the Iowa Public Employees’ Retirement System is $2.3 billion, more than double the IPERS’ estimate of $1.1 billion.
If the same holds true for the local government portion, the entire fund could be $12 billion in the red rather than the $5.9 billion IPERS has estimated, said Gretchen Tegeler, executive director of the Taxpayer Association of Central Iowa, an advocacy group for taxpayers.
While IPERS Chief Executive Officer Donna M. Mueller doesn’t dispute Tegeler’s claims, she said in a written response that taxpayers likely will hear a “number of different ‘pension liability’ numbers” in coming years as new Governmental Accounting Standards Board rules go into effect.
But Tegeler said local governments throughout Iowa already are cutting services to pay for soaring pension costs.
“It’s going to get worse before it gets better,” Tegeler said.
Des Moines, for example, has cut $28 million in the past eight years, partially a result of increased pension costs, City Manager Richard Clark said.
The city has cut the number of days its libraries are open, eliminated a medic squad, reduced street cleaning and privatized some park maintenance services. And, officials have raised property taxes.
“Our general fund is around $160 million,” Clark said. “So ($28 million) is a fairly significant portion. We’ve had to make a lot of cuts in government and that has impacted how we do our work and in some cases the level of services. We have tried to maintain services like police and fire, but clearly everything we do is impacted by those cuts.”
It’s the same story across Iowa.
“We’ve raised taxes and (pensions) are a big chunk of why we’ve had to raise them,” Cedar Falls Mayor Jon Crews said. “The state sends us the bill and says, ‘This is what you owe.’ They set the benefits, but they don’t want to deal with the costs.”
The rising price tag of police and fire pensions not covered under IPERS also is a significant cost-driver, Tegeler said. Forty-nine of the state’s largest cities belong to the Municipal Fire and Police Retirement System of Iowa, commonly known as the “411 plan.”
“Taxpayers are spending about $665 million a year in total on defined-benefit pensions (plus another 10 percent of university employee salaries), which is about $250 million more than was the case just a few years ago,” Tegeler said.
“The $250 million increase equates to the salaries of 3,700 teachers. That’s a big and growing tab and our concern is that taxpayers aren’t really connecting the dots on these things. It’s something that occurs so under the radar that most people don’t even realize how much it is and what the impacts are.”
While Iowa’s pension predicament isn’t nearly as bad as those in some states, Iowa Gov. Terry Branstad and other officials acknowledge significant reform is needed.
In a little-noticed report in early August, state Auditor Mary Mosiman said officials need to “address the sustainability of pensions.”
“I believe a common goal of all Iowans is to have a pension system that keeps its promises to Iowa’s public servants while being fair to the taxpayers,” Mosiman told Iowa Watchdog. “To do this, our state’s pensions must be placed on a realistic, sustainable path to meet any future obligations.”
This story originally appeared on Watchdog.org.