PENSION REFORM IN MEMPHIS AND SHELBY COUNTY

With the help of many friends, I am in the process of creating an organization called MEMPHISSHELBYREFORM. The purpose of this organization will be to educate taxpayers in the area of needed reforms in our City and County governments. The only way to slow down or reverse the decline of Memphis and Shelby County is to push for reform in government aimed at the efficient use of our limited tax money.

I will be posting a series of proposed reform ideas and would appreciate your thoughts on them. I have already posted my thoughts on the Memphis School System.

Today I would like to look at our pension system that we have at the City of Memphis. The system in Shelby County government, the MLGW and other governmental agencies is similar.

Our system promises a defined benefit pension payment if you meet certain requirements. In a simplified report I have attached the general outlines of the City of Memphis system. The plan benefits vary depending on when you started, how long you worked and whether you are a policemen or firefighter or a general employee. But generally you can earn a pension up to 72-1/2% of average monthly compensation. The employees contribute to this system which is generally matched by the City of Memphis.

Most private sector employees who work for private for profit companies do not have a defined benefit plan. Rather they generally have a defined contribution plan like a 401K. The difference is that the public pension plan is a legal obligation on the taxpayers of Memphis and Shelby County. This is a huge difference.

What I propose as a reform is that for future employees of the City of Memphis, MLGW and Shelby County we go to a 401K type plan where we are sure of the cost of the plan each year and are not obligating ourselves for a future payment from our tax stream that we may or may not be able to pay. I am not talking about taking anything away from current employees as they would be grandfathered into the current plan.

Another big part of the promises that politicians have made to current public employees concerns the post retirement medical and life insurance benefits where generally the taxpayers pay 70 to 75% of the medical premiums after retirement. This is a huge benefit and unfortunately the politicians have not been funding this promise. The current unfunded liability of Memphis, Shelby County, the MLGW and the Memphis City Schools is $3.125 BILLION DOLLARS. That is BILLION, NOT MILLION. The government is requiring that these organizations put this unfunded liability on their balance sheets starting next year. This huge unfunded debt will make borrowing money much more expensive as the balance sheets will look much different. Realistically, the taxpayers cannot meet this obligation and the politicians are already talking about cutting this benefit which is not a legal obligation.

The whole point of my reform plan is this. Why should the average taxpayers who works in the private business sector offer more to public employees than they are offered in the for profit private sector. Politicians always manage to feather their nest at the tax payers expense. The truth is that all taxes come from a for profit business and without business profits, there would be no money available for any public sector employee.

Click here to read the essential details of the current City of Memphis defined benefit pension plan