Brian Sonntag releases Seattle pension study

January 22, 2014

Former State Auditor Brian Sonntag released a study today highlighting the need for pension reform in Seattle. Sonntag worked on the study at the request of the Washington Policy Center.

Considering the recent debate surrounding the Boeing 777X contract vote and pension changes, it is not a surprise to see the cost of Seattle's defined benefit pension program also in need of reform.

According to Sonntag:

The City of Seattle pension system is in trouble. A statement by city leaders recognizes significant risks from the rising financial burden of unfunded liabilities and that a new approach is needed.

The City pension system, started in 1927, today carries an unfunded liability of nearly $1 billion, a staggering financial burden that must be shouldered by a community of less than 635,000 residents. The rising cost of City pension payments, over $72 million in 2011, is crowding out funding for safety-net programs and other public services that are essential to the people of Seattle.

The City’s old-style pension program is becoming increasingly outdated. The system’s unfunded liability poses a major threat to Seattle’s long-term financial stability and to Seattle residents who may be required to bail out the system through higher taxes. Significant reforms are needed that provide a funded benefit for city workers, like the local librarian, and reasonable protection for taxpayers.

Among the report's Key Findings:

  1. The Center for State and Local Government Excellence reports that pension programs for government employees, like maintenance staff, public health workers and librarians are facing unprecedented breakdown.

  2. In 2008, the Seattle pension system had unfunded liabilities of $175 million, which grew to $1.1 billion in 2013.

  3. The volatility and magnitude of this unfunded liability has increased the tension between providing services to current residents while legally fulfilling past pension commitments.

  4. Benefit increases added by the City in 1998 and 2001 have resulted in much higher monthly payments to retirees. The sharp rise in pension costs is financially impacting the City’s pocketbook as well as those of its employees.

  5. The Seattle City Council needs to enact comprehensive pension reform that takes a new approach. The goal of reform should be to provide sound retirement income for retirees, but at a lower cost to both Seattle residents and to City employees.

  6. To enhance fiscal responsibility, several jurisdictions across the country have phased out their traditional defined-benefit plans and established well-designed, employee-owned defined contribution retirement plans.

  7. Allowing city workers access to personal defined-contribution accounts would help solve the pension system’s financial problems, while providing a fair and sustainable retirement system for public employees.

Pension reform is also receiving attention in the state Legislature. Among the bills that have been introduced:

The ideal state pension reform would:

  • Not result in any skipped payments
  • End early retirement
  • Close Plan 2
  • Direct all savings to pay down the state’s unfunded pension liabilities
  • Place new hires into a defined contribution plan
  • Enact constitutional provisions requiring the actuarially recommend pension payment and create a supermajority threshold to enact new benefits.

According to the state's 2013 CAFR, Washington's unfunded pension liability is nearly $6 billion. A pending Supreme Court ruling could further add to that pension liability.

Comments

Are you well taken care of, Brian?

I'm not sure Mr. Sontag has done anything approaching a public service. First, he's shilling for the WPI, a well-know right wing (or "market-based" as they call themselves) and totally predictable pipeline for attacks on the middle class that favor the moneyed. The temerity to print error after error about the Seattle pension plan right after the Boeing Machinists accepted a defined contribution plan with a gun at their head. By 1%! His is only a wedge piece and should be exclusively seen as that.
Union busting in the name of shareholder value is the mantra of Sontag and the cabal he "studies" for. There are many of these bought and paid for scholars going through the revolving door to corporate mouth piece for hire after years in public office (where the taxpayers no doubt provided them a cushy defined benefit pension plan!).
There are many counters to this anti-worker, union busting tripe, soon to be published. I only want to register my hearty contempt of WPI and it's lies about how the little guy can make out by following the rigged ideas of their clients, the big guys.

Hate-filled attack.

It's usually better to ignore the hate-filled comments of people who are too fearful to identify themselves, but in this case it's important to respond to this mean-spirited attack on a respected and long-serving former elected official.

Brain Sonntag was our state auditor for 20 years and he was (and is) widely respected for his integrity and independence. He worked in public service to bring trust and responsibility to state programs through performance audits conducted by his professional staff. He served selflessly and was re-elected four times, and in his last race received 63% of the vote, more than most other Democrats on the ticket.

Given Sonntag's talents he could have done very well in the private sector, but instead he choose a career serving the people of our state. Many former officials seek to cash in after retiring. Sonntag chose to head the Tacoma Rescue Mission, providing beds, rehab. programs and 1,000 meals a day to the hungry, the addicted, the homeless and the unemployed in his community.

Before launching an angry attack, this nameless commenter should
first read Sontag's report and respond to his research and conclusions, instead of irresponsibly attacking the author, then read the city's own report on the structural weaknesses in the pension program.

Becoming better informed is the best way to foster mutual understanding and to respond to someone you disagree with, instead of lashing out in ignorance, anger and hate.

Why the shortage of creative problem solving?

There are many well respected groups / think tanks in the Seattle area who have reading committees to study their own reports specifically for bias before publication. This is one of the reasons I seriously question reports published under the auspices of your group. It feels like you commission biased "studies", books, publications and that's what you get.

Paul, I've heard you speak on several occasions and usually have no issue with your particular point of view. I just honestly don't know what you're doing with this group. There doesn't seem to be direction from the top on what is acceptable behavior in terms of ethical and authentic research. I can guess where any study / article is going to lead. Why the shortage of creative problem solving? Win/Win solutions? I think of your group always going for the Win/Lose solution.

The American Enterprise Institute has evolved and made room for exciting innovative thinkers. Does your group have room for talent like this?