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Harp, Fernandez.
Henry Fernandez suggested a way to defuse New Haven’s pension ticking “time bomb”: convince the city, the state, and government workers to cooperate on a rescue plan. Toni Harp called Fernandez’s plan “sophomoric”; even if it made sense, she argued, he couldn’t pull it off.
The two mayoral candidates offered those different perspectives Tuesday morning, as Fernandez held a press conference to flesh out a proposed pension fix he first proposed last week. Click here to read his proposal. The press conference took place at the home of supporter Robin Golden, a former Yale law professor and housing authority official.
Fernandez said his plan addresses the problem of ballooning pension obligations, which will gobble up more and more city tax dollars, leading to service cuts, increased taxes, or worse.
He began Monday’s press conference by laying out the scope of the pension problem: The city has $505 million in unfunded pension liabilities. Public employee pension funds are only about half-funded. As a result, the city’s bond ratings agencies have lowered their outlook on city debt.
His plan is to convince the state, the city, and municipal workers to sign on to an agreement. The state would agree to increase the amount of Payment In Lieu Of Taxes (PILOT) money it gives to the city to the level it was in the 1980s, an increase of about $20 million. The city would agree to take the extra money — an estimated $20 million per year — and put it towards the pension fund. City workers would agree to increase their pension contributions for as long as the city and state are increasing theirs.
Left unchecked, the pension problem will hurt the state, the city, and city workers, Fernandez said. City workers face the possibility of layoffs and cuts to pension and health care benefits. The state could be forced to step in an take control, which would cost the state tens of millions for years. The city would be forced to cut services and raise taxes. If the state took over, the mayor and Board of Aldermen would become irrelevant.
The solution, Fernandez said, is his planned agreement. He said the state and city workers would sign on if they’re shown it’s in their interest to do so, since the alternative is much worse.
“I start with the assumption that everyone can see their self-interest,” he said.
Harp — an 11th-term state senator who like Fernandez is running for mayor in a Sept. 10 Democratic primary— called Fernandez’s plan a non-starter given the realities of the state Capitol.
“Just based on my knowledge, having had to cut hundreds of millions out of this biennial budget,” Harp said, “there aren’t really the resources” to give the city an extra $20 million a year.
“There would be competition between towns,” Harp said. Other Connecticut municipalities have worse pension problems than New Haven, she noted.
Hamden’s pension plans are funded at a lower percentage than New Haven, for instance.
“It’s a great idea. But it’s probably not operational,” she said. “And even if it were, I don’t believe he has the relationships to make it operational.”
“I’ve been in the legislature for 21 years. I’ve only heard of Fernandez coming there one time,” she said. “He’s never spoken to me.”
“Every town in Connecticut wants money. They’re all suffering the same as we are. To think that we can go up and get an extra $20 million is kind of sophomoric without understanding what it would take to get that. It sort of says to me that he doesn’t really understand the economy that we’re in.”
Asked how she’d deal with the pension problem, Harp said, “First, I would really try to understand what the problem is and where it started.” She said she’d look at why the pension fund investments are underperforming: “What will get us at least the best return on what we haven?”
Then, Harp said, she would seek advice from the state treasurer, who has worked on a similar problem with the state teachers pension fund and “has come up with a way to get it close to fully funded.”
“It doesn’t appear that Sen. Harp knows what was done with the teachers’ pension fund,” Fernandez responded later. “It’s my understanding that the fund was filled with borrowed money. And then when the market crashed in 2008 and 2009, there were huge losses. What she’s suggesting is very dangerous for the city of New Haven in a wholly inappropriate effort to solve a very serious problem.”