A dire warning for Cincinnati: the city's pension fund, one of the oldest in Ohio, is facing a critical financial crisis once again. This comes over a decade after a federal agreement was supposed to stabilize the system, but now, the retirement fund is under immense strain, and officials are proposing a bold $100 million plan to prevent further damage.
Former Mayor John Cranley described a previous crisis as "existential," and the city's efforts to address it led to a federal consent decree in 2015. However, the pension's finances have taken a turn for the worse this decade, with sluggish market performance, early retirements in 2020, and increasing life expectancies all contributing to the problem.
The city's pension fund is currently underfunded by nearly $850 million, with only 68% of the necessary funds to cover future benefits. If no action is taken, projections show the fund could drop to a mere 18% funded by 2045. Mayor Aftab Pureval has recognized the severity of the situation, stating, "The red flag is up." He emphasizes the urgency, as the fund's health is a critical indicator of the city's fiscal well-being.
Cincinnati's pension system covers nearly 4,400 current employees, including road crews, health department workers, and other city staff, as well as 4,100 retirees. Without intervention, Pureval warns, "The pension would fail and bankrupt the city. It would be catastrophic for the city's fiscal health moving forward." This is a stark reminder of the potential consequences if the issue is left unaddressed.
Pureval's proposal aims to infuse the pension fund with $100 million. Half of this amount will come immediately from a reserve fund originally set aside for tax refunds to people working from home during the COVID pandemic. The other half will be sourced over time from enterprise funds overseen by Cincinnati Water Works and the Metropolitan Sewer District. Additionally, the city plans to increase its annual pension contribution to between 19.25% and 21.5% of total payroll, and employee contributions will also rise from 9% to 10% over four years.
Mayor Pureval has been actively discussing the plan with the City Council, and he believes they are on board, stating, "I've spoken to all the council members, and they all believe this is a home run." However, the proposal still requires approval from various parties, including the federal judge overseeing the consent decree, city employee unions, and the Hamilton County Commission, which must approve the part of the deal involving the Metropolitan Sewer District.
The approval process could take several months, with the goal of completing it by July 1, when the new city budget takes effect. This is a critical juncture for Cincinnati, and the outcome of these negotiations will have a significant impact on the city's financial future and the retirement security of its employees.
