Portland fire and police pension liability jumps 15% in two years
The actuaries who estimate how bad the City of Portland's debt is for police and firefighters' retirement and disability benefits have prepared a new report, and it shows that this blog's estimates of the city's unfunded liability for those benefits have actually been conservative. According to the report, the unfunded liability increased from $2.217 billion on July 1, 2008 to $2.549 billion on July 1, 2010. That's a 14.98% increase over the two years, or an annual compound rate of growth of 7.23%.
On our City of Portland debt clock, in the left sidebar of this blog, we've been using an annual growth rate of 6.5%. And so the situation is worse than we thought.
For those of you just joining us, if every police officer and firefighter in Portland stopped working right now and started collecting the pension benefits to which he or she is already entitled, the city would have to put aside $2.549 billion to pay off all of them and all of those who have previously retired. And that's assuming that the city can earn 4% on its investments -- good luck with that in this market.
In fact, the city has nothing put aside for these benefits -- nothing. It will all have to be paid out of future property taxes.
Besides the police and fire pensions, there are also problems with the city's other pensions under the Oregon PERS system. That's underfunded to the tune of nine figures these days as well. Plus there are retiree health care liabilities, all of which push the pension debt total well over $3 billion.
Portland is going broke fast, folks. Go by streetcar!
Anyway, we'll update our debt clock tonight to reflect the new numbers. We'll leave the growth rate at 6.5% going forward, but it's obvious that this debt can grow even faster than that. [Via Oregon Capitol News -- a great catch.]
| Posted at 5:47 PM | Permalink |
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Comments (16)
If your husband did this to your household finances (and hid it) would you stay married to him?
If your boyfriend does this with his own finances would you still be enchanted by him?
If your wife did this to your household finances (and hid it) would you stay married to her?
If your girlfriend does this with her finances would you still be hot for her?
If your politicians do this (and they did, to the tune of $6.3b unfunded) would you want them to stay in charge?
If your President did this (and he did, to the tune of $2.52 trillion) would you want him to stay in charge?
http://www.cnsnews.com/news/article/72404
Just sayin'.
Posted by got logic? | October 20, 2010 6:38 PM
Lump on top of that all the millions of dollars in lawsuit payouts from clumping folks to death.
Posted by michael | October 20, 2010 7:11 PM
Sadly, Michael, million for lawsuit payouts re the PPB are chump change compared to the unfunded benefits deficit. Truly chump change.
And property owners, like me, inside the PDX city limits are the chumps.
Posted by Nonny Mouse | October 20, 2010 7:25 PM
Didn't we just go past $10K per capita a couple of months ago?
I'm gonna love how Randy is going to sell the next prop tax increase since the one tow years ago isn't enough.
BTW - annual compound rate of growth of 7.23% means it doubles every 10 years. So when it peaks (according to the report) in 25 years, the unfunded liability will be about 5x as large.
Posted by Steve | October 20, 2010 8:25 PM
Even after it peaks, there'll still be a problem with the latest tier of officers hired under the PERS system. That's got an unfunded liability, too, but it's hundreds of millions, not billions.
Along with bonds, the current debt meter stands at $10,738 per city resident, before this latest hit.
Posted by Jack Bog | October 20, 2010 8:29 PM
I just got my property tax statement....yeow!
Posted by Travis | October 20, 2010 9:13 PM
Award for most insightful comment ever:
According to Nancy Hartline, FPDR Business Operations Manager, “A concern is whether the future stream of expenditures may someday exceed the maximum amount of tax revenue we can raise.”
Just keep whistlin' Nancy as you walk past the graveyard. Pretty soon the school "year" will be 2 days long.
Posted by Steve | October 21, 2010 5:56 AM
"there'll still be a problem with the latest tier of officers hired under the PERS system."
One problem from the article - Disability benefits remain with the FPDR.
So guys like Hurley can get their Dr Feelgood to say they can't work anymore due to stress. Then we get to pay for 2 years at cooking school and because of the last court case we can't make them take a desk job.
They'll learn to exploit this loophole even more. It's always a game of whack-a-mole.
Posted by Steve | October 21, 2010 5:59 AM
Steve -
Two day school year as a result of Police and Fire Pension costs ?
City doesn't fund school in Portland last I looked.
How do you make the connection to Police Fire pensions causing cuts in school days?
It makes a great line for government
bashing, but what is the actual real world connection?
Just wondering.
Posted by Nonny Mouse | October 21, 2010 8:27 AM
what is the actual real world connection?
OK, 2 police cars per shift. In addition, each of these add ons to your property tax bill makes things like school bonds a lot harder sell (yes - I've actually voted for a specific obligation school bond before).
You're right, PERS premiums would cut into the school year and other customer service from the state.
Posted by Steve | October 21, 2010 8:32 AM
The math is quite simple: bondholders get paid first, then pensioners, then current employees, then vendors. That order of payment isn't likely to change in bankruptcy, but the amounts certainly would.
If you buy City of Portland bonds, it is very likely you will be paid on time, especially if they're insured by a surviving muni-bond insurer. If you are a retiree, you are likely to get paid until the politicians make retroactive reductions which will be subject to court challenge. If you're a current employee, you better start kissing ass now, because there will be mass layoffs when the s**t hits the fan. Vendors? Think about C.O.D. or C.I.F. letters of credit.
Posted by Joseph | October 21, 2010 8:46 AM
Nonny Mouse, all public pensions are in a similar situation. 2-day school year, half the cops and firefighters on the street, and us paying for the retired employees to move to Palm Beach.
Posted by Snards | October 21, 2010 9:40 AM
Steve -
School bonds don't pay teacher's salaries. Pleas tell me how the outrageous deficit in PDX' unfunded pension plan for Fire and police reduces schools to 2 days a year.
Note - I think the PPFR system is awful.
But how does that system cause 2 day school years?
Posted by Nonny Mouse | October 21, 2010 12:00 PM
Snards -
Usually I agree with your posts 110%.
But you are not tracking this issue PPFR is a self contained suystem mostly isolated from PERS . It is a COP obligation that is unfunded. The COP does not fund school systems. How does the unfunded liability of the PPFRS cause 2 day school years?
Clearly, it doesn;t.
While its an attractive demogaugic (sp?) line, it makes about as much sense as anything Sarah Palin, Liars Larson or Sam Adams ever say about finance.
Posted by Nonny Mouse | October 21, 2010 12:05 PM
Pleas tell me how the outrageous deficit
"You're right, PERS premiums would cut into the school year"
I over-reached.
Posted by Steve | October 21, 2010 2:07 PM
My rental condo in Portland is sold, at a big loss of course. But that cuts off my liability for future costs like police and fire disability and pensions; repairing replacing and upgrading sewers (Clean Rivers), etc., etc.
Posted by Don | October 21, 2010 4:42 PM