Thomas Breen photo
City spokesperson Laurnce Grotheer at a March budget workshop.
The city has deposited in full its actuarially recommended pension contributions for the year, backtracking on a previous proposal to pull money from the pension budget and use it to cover a projected multi-million-dollar deficit for the fiscal year that ends this week.
But now that the pension raid is off the table, city officials are scrambling to find upwards of $10 million to balance the city’s budget.
On Monday afternoon, city spokesperson Laurence Grotheer announced that the city had deposited approximately $9.8 million to the Police and Fire Fund (P&F), a public pension fund that covers public safety employees, as well as approximately $6.4 million to the City Employees Retirement Fund (CERF), a public pension fund that covers all other city employees (except for teachers).
Those contributions bring the city’s pension contributions in line with the $34.6 million originally budgeted for P&F and the $21.6 million originally budgeted for CERF.
Earlier this month, City Controller Daryl Jones had told the aldermanic Finance Committee that the city planned to use $16 million from its $61 million pension budget to help close a $14 million projected budget deficit for the current fiscal year, which ends on June 30.
At a subsequent emergency pension fund meeting two weeks ago, representatives from both city pension funds attacked the administration for proposing to skimp on budgeted and pledged payments into pension funds that are already nearly broke.
Both public pensions are seriously underfunded. P&F and CERF represent around $900 million in combined liabilities, according to the city’s independent Financial Review and Audit Commission (FRAC). As of mid-2017, P&F was funded at 40.9 percent, and CERF was funded at 34.1 percent.
The actuarially recommended contributions, or ARCs, that the city completed on Monday are set at annual levels that, if paid in full each year, should allow the city to fully fund its pensions funds over the span of several decades.
“The city’s pledged contribution to P&F was increased by $7 million this past year alone,” noted Grotheer’s press release, “due to recommendations made by actuaries based upon excessive overtime since 2008.”
“It was decided that the best way to proceed was to honor that pledge to make those contributions and to pursue other options for closing the projected budget deficit,” Grotheer told the Independent on Monday night.
But what those “other options” might be are less than certain.
Earlier this month, the city announced that Yale University had pledged to increase its annual voluntary contribution to the city by $2.5 million. Just last week, the city’s Parking Authority also voted to send an additional $2 million to the city to help shore up the city’s struggling finances.
But even after those increased contributions, the city could still be looking at a projected budget deficit upwards of $9 or $10 million for the 2018 fiscal year. The next monthly financial report, which will cover city expenditures, revenues, and projected deficits through the end of May 2018, comes out this Thursday.
When asked about how the city plans on closing its multi-million-dollar projected deficit with the end of the fiscal year just around the corner, City Controller Daryl Jones and Acting Budget Director Michael Gormany said they are doing all they can to end the year on a balanced budget. They directed any further questions on the budget to Grotheer.
“The mayor is working with her budget and finance staff to finalize those plans,” Grotheer said, “but the resolution of the projected Fiscal Year 2018 deficit is not finalized and now this option of postponed pension payments is off the table.”
He said city officials are also meeting with representatives from Yale-New Haven Hospital and other “major partners” to try to find additional revenue to bridge the budget gap.
On Monday night, the Board of Alders voted unanimously to overturn the mayor’s veto of a budget order that requires all “additional revenue” slated for the city’s general fund budget for next year to go towards decreasing the new 11 percent tax increase, as opposed to reducing the current year’s budget deficit.
“Creative minds can get through anything,” Walker-Myers said about city staff’s plans to close the budget deficit now that the pension budget raid is off the table.
“This is an urgent situation,” said Westville Alder and Finance Committee Co-Chair Adam Marchand about the multi-million-dollar projected budget deficit for the current fiscal year. He said he understands why the city chose to make its pension payments in full, so as not to exacerbate the current unfunded liabilities. And he said he is confident that city staff is taking seriously the necessity of ending the year with a balanced budget so as not to risk a credit agency downgrade of the city.
But, he said, he had not heard any plans from the city thus far about how it plans to close the projected deficit. “What’s your Plan B?” he asked. He noted that the processing of city receipts for any given fiscal year often extend through July and parts of August, and so the city and the public may not know the final tally on this year’s budget until several weeks after the official close of the fiscal year.
He said he expects city officials to discuss their plans to close the projected budget deficit at the July 9 Finance Committee meeting.