Fort Smith employees, managers push back against retirement plan change

City employees packed the room at Tuesday’s (July 14) study session of the Fort Smith Board of Directors in which reinstatement of a business license fee, a reduction in non-uniformed employee retirement contributions and cuts to the city’s animal control services were options on the table to help pay for a shortfall in police and fire pension funding.

At issue is the ongoing struggle by the Board and city staff to plug an anticipated 2015 budget year shortfall of $899,273 in the city’s police and fire (LOPFI) contribution fund. The estimates show the fund balance at $5.731 million by Dec. 31, but reaching a deficit of $419,042 by 2021.

The Board recently voted to return benefits under the pension plan back to the levels in place in 2004. That action saves the city an estimated $477,000 in this fiscal year and up to $516,000 by year 2026. But based on estimates, additional spending reductions and revenue increases totaling approximately $2.1 million annually are needed to keep the LOPFI contribution fund solvent beyond 2030.

A majority of the more than 150 who on Tuesday packed the community room of the Fort Smith Public Library were city employees concerned about a possibility that the Board could reduce the 10% of annual earnings that the city places into a 401(a) retirement account for each employee. The plan is fully vested after 5 years.

The Board has talked about requiring employees to match half of the contribution, meaning the city would reduce its contribution to 5% and the employee would make a 5% contribution. That plan would save the city $1.325 million a year.

“The actual savings would likely be greater. Some employees would be unable or unwilling to pay the employee match and would drop out of the plan. Other employees might opt to participate at an amount less than 5%,” noted a July 9 memo from former City Administrator Ray Gosack to the Board.

Gosack surprised the Board on Friday with his resignation. The Board has named Deputy City Administrator Jeff Dingman as the acting city administrator.

In the memo, Gosack also said the reduction would not be good for the city’s workforce.

“A significant change to the non‐uniformed retirement plan will likely affect employee morale, retention of employees, and the ability to attract new employees. We could expect higher turnover rates, increased training costs, and less likelihood of attracting highly qualified and talented job applicants,” he noted.

City HR Director Richard Jones delivered a lengthy plea to the Board to not reduce the contribution fund immediately. He said if they do reduce it, to phase it in over a period of years. He said the reduction would be “detrimental” to family budgets.

“I realize the general fund is in a difficult place,” Jones told the Board, adding that reducing the benefit will hurt the city’s ability to hire quality people. “It’s going to be hard for me to go out and face that engineer and say, ‘This is the place you need to come to work.’”

Jones recommended Dingman gather up all department heads and talk about other cuts to reach the Board’s objective.

City Directors Keith Lau and Kevin Settle said they want better numbers with respect to estimates on the pension shortfall. Lau said he wants to see top city staff come back with a “more palatable solution” instead of the “shock and awe” plans to cut animal control departments and close fire stations. Lau said he understands the need for good employee benefits, but is not interested in approving new taxes and fees “without an absolute confidence level that we’ve done everything possible to cut our expenses.”

City Director Tracy Pennartz said the Board is not likely to pursue the “wrecking ball” budget cutting ideas from the fire and police departments, but told Jones and the gathered employees that a 5% reduction in contribution to the 401(a) “is something that will remain on the table” as they gather and review all ideas.

City Director André Good also was somewhat critical of the budget cut ideas from the fire and police chiefs.

“No disrespect to the (police) chief, but I don’t think these were items anyone expected us to pass … (or) that the departments gave us realistic” cuts on which to make a decision, Good said.

The Board asked city staff to revise pension obligation estimates and provide other budget cut ideas from department heads. The Board also placed on the July 21 regular meeting agenda a proposal to discontinue financial support (outside agency funding) for area charities. The 2015 budget includes $145,800 for outside agencies.