Rainford: City In the Soup Again

by dave | Tue, 11/17/2009 - 1:28pm

From his testimony before Ways and Means committee, Jeff Rainford describes how  pensions are a big part of the city's budget problems:

In 2000, the average total compensation per employee cost City government $43,000. Today, we are spending about $68,000 per employee—an increase of 36%. Unfortunately, our employees probably don’t know that… because the increased costs have gone to rising pension and health care costs, instead of pay raises.

What happened with the pensions? During the 1990s, the stock market was hot, and the three systems had surpluses. So, the trustees convinced lawmakers to increase the benefits. Then, in 2000, the stock market crashed when the technology bubble burst.

Very quickly, the three systems went from having large surpluses to large unfunded liabilities. The City’s costs went from about $7-million to year, to more than $60-million per year. Along the way, the City raised the sales tax and borrowed and allocated $145-million to the three systems. We got caught up.

Just as we got caught up, the stock market crashed again. Collectively, in the last two years, the three systems lost close to $500-million. So, we are in the soup again.

Comments

by GordonLeadFoot | Mon, 11/23/2009 - 11:50am

What a shock--government officials planning on the good times going on forever, so lets increase the benefits.

In the business world this is called taking on recurrent expenses to be covered by non-recurrent revenue.  It happened all of the country and it will not end well.  There is a bankruptcy provision for cities, but not for states.

by Bill Hannegan | Tue, 11/17/2009 - 10:38pm

The Health and Human Services Committee approved the St. Louis City Smoke Free Air Act of 2009 without receiving an economic impact statement from the Ways and Means Committee. But Keep St. Louis Free engage two economists to look at the effect a smoking ban would have on St. Louis City. Dr. Chad Cotti of the University of Wisconsin predicted that the smoking ban would cut City bar employment 19.7 percent. Economist Dr. Michael Marlow predicted that up to 54 percent of City restaurants and 83 percent of City bars would suffer revenue losses due to the ban. The smoking ban will put St. Louis City further into the soup.

http://www.scribd.com/doc/20287866/SB-STLOUIS-06012009