Proposed Ohio fire, police pension changes could add $11M to Cleveland's annual costs

Union representatives testified in March in favor of cities paying 26.5% of the salaries of officers and firefighters – up from 19.5% for police and 24% for fire


Courtney Astolfi
cleveland.com

CLEVELAND, Ohio  — A bill under consideration in the Ohio House that would increase city contributions to police and fire pensions would cost the city of Cleveland roughly $11 million more per year, according to Chief Financial Officer Ahmed Abonamah.

Abonamah flagged that potential price tag as a substantial budgetary concern earlier this week during a discussion of city finances before a council committee.

Abonamah said he and officials from other Ohio cities will head to Columbus to provide testimony opposing the bill. Though a schedule has yet to be released, that hearing could happen as early as next week.

“[We want] to make the point to the General Assembly that this is real money,” Abonamah said. “There are enough [financial] headwinds we’re facing; we don’t need to add these costs to the ledger.”

Proponents of the change, including police and fire unions like the Ohio Fraternal Order of Police and the Ohio Association of Professional Firefighters, already provided testimony in a March 20 hearing before the House’s Insurance Committee.

Such hearings may be a signal that the bill could pass out of committee, though it would still require approval from the full House and Senate, plus a signature from Gov. Mike DeWine.

If approved, cities like Cleveland would have to pay into the Ohio Police and Fire Pension Fund 26.5% of the salaries of police officers and firefighters – up from its current contributions of 19.5% for police and 24% for fire. Those rates, set by law, have been in place since 1986.

Cleveland’s 2020 pension fund contribution was $38.6 million, according to a fund spokesman. That would put future contributions, under the proposed law, somewhere around $50 million annually.

The increased costs would be phased in over four years, with the full cost going into effect in 2027. The proposal would cost Cleveland about $11 million over the phase-in period, and about $11 million every year after that, Abonamah said.

The change is intended to keep the pension fund solvent for the next three decades. It is currently projected to be in a healthy position for the next 25 years, but state law requires a solvency target of 30 years, Mary Beth Foley, the fund’s executive director, said in a December press conference.

Employees, as opposed to employers, have shouldered the costs of shoring up the pension fund in recent years, via increased contributions and benefit cuts.

Foley in December pointed to a few reasons to further shore up the fund. She said capital market trends mean the fund may not get as great of a return on its investments as it had in the past. And stable benefits, she said, could mitigate post-pandemic difficulties in recruiting and retaining police and fire personnel. Foley said the time to address those concerns is now.

But Kent Scarrett, executive director of the Ohio Municipal League, which lobbies on behalf of cities, said the timing is flawed. Federal aid from the American Rescue Plan Act may make it appear as if cities are “flush” with cash at the moment. But such money is limited in use and a one-time deal, meaning it can’t be used to cover long-term costs in the future, Scarrett said.

Cities right now are also dealing with potentially large losses in income taxes due to the prevalence of working from home. And they’re facing other financial challenges, including inflation and supply-chain issues that are leading to higher price tags on projects and cost overruns, he said.

Statewide, the pension fund change would collectively cost cities $116 million more annually, according to an analysis from the Legislative Service Commission.

City Councilman Kerry McCormack, during the Monday committee hearing, noted that Cleveland would have to offset its increased costs somehow. And more than half of the general fund already goes to police, fire and EMS, meaning the pension costs could take money away from safety services, he said.

“We’ve lost hundreds of millions out of the [state’s] local government fund, and now Columbus wants to take more money out of our bank?” McCormack said. “If we want to talk about who’s defunding the police, it’s Columbus, not cities.”

Scarrett put it this way: “When these changes are put on municipalities… it challenges our ability to fund municipal law enforcement. There’s only so much revenue we have at our disposal, and when these mandates are coming from the legislature, it absolutely compromises cities’ ability to support basic services.”

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