Birmingham Mayor Randall Woodfin addressed city employees Wednesday, acknowledging “serious challenges” facing the city’s pension system and urging the pension board to begin working with him on solutions immediately.
“For years, this issue has not been handled,” Woodfin said in a letter released alongside a video address. “If we act now, there is time to correct this problem, protect our employees and avoid a financial crisis for the city.”
According to Woodfin, the city’s unfunded pension liability stands at $378 million, which means that the city will need to contribute $378 million more than it already does to the pension fund over the next 30 years. If that doesn’t happen, the fund will have run out of money by that time.
Woodfin’s administration first acknowledged the city’s unfunded pension liability in March, when his transition committees presented their findings to the public.
“We’re creating new deficits, big deficits that won’t go away, holes in our balance sheet,” said Daniel Coleman, co-chair of the transition team’s Transparent and Efficient Government Committee.
The consequences of the unfunded pension liability, Coleman said, would involve downgrades by credit rating agencies, making it more difficult, and eventually impossible, for the city to borrow money. That’s in addition to the primary issue — that the city would be unable to pay the pensions of its retirees.
Woodfin’s office already has made some moves toward addressing the pension issue, including a $2.9 million increase for pensions in the FY 2019 budget. More significant steps will be necessary. Even with that increase, an estimated $10 million to $12 million still needs to be added to the city’s annual pension payments.
“I am asking the pension board to work with me to come up with a solution,” Woodfin said in Wednesday’s video. “They will take the next couple of weeks to discuss options to correct the problem, protect all of our employees and avoid a crisis for our city.”
Until then, Woodfin’s office is focused on providing outreach to concerned employees and retirees. A new landing page on the city’s website features answers to frequently asked questions and links to credit agencies’ assessments of Birmingham finances. A new email address — email@example.com — also has been created to field employee questions.
Woodfin estimates that recommended solutions will likely be made public “over the next couple of weeks.”