Mayor Tom Barrett: 'Pension Structure Is Not Fiscally Sustainable'

Sep 25, 2019

Rising pension costs were the major concern raised by Milwaukee Mayor Tom Barrett in his 2020 budget address before the Common Council on Tuesday morning. He called the current situation “untenable."

In just three years, the city is expected to pay $100 million more for pensions. Currently, the proposed city 2020 budget is $1.6 billion. Well, Barrett tried to put that staggering $100 million number into perspective.

"You'd have to eliminate the budget of the Health Department, Employee Relations, City Development, the Department of the Administration, the Treasurer, Neighborhood Services, the Library, and the common Council City Clerk," says Barrett.

Even after all that, he says you'd still be millions short. 

But what accounts for the rising cost? According to Barrett, there are several contributing factors. One is the anticipated rate of return. That’s the amount of money the city is expecting to come in from the investments from the pension fund.

The Pension Board reduced the anticipated rate of return from 8% to 7.5%. While half a percentage point may not seem that significant, the Budget & Management Director Dennis Yaccarino says that when you’re dealing with a $5 billion fund it is a big deal. In this case, it accounts for the entirety of the estimated extra $100 million that the city will need to contribute by 2023. 

Benefits received by fire and police are another factor Barrett mentioned that is driving pension costs for the city.

"More than 80% of the estimated 2020 employer pension contributions are attributable to uniformed police and fire employees. That’s 80% of the cost for 44% of active employees in the pension system," says Barrett. 

With the fiscally unsustainable pension structure, the mayor says the budget forces the city to take a hard look at the staffing levels at the police department. Therefore, Barrett is proposing a reduction of 60 positions. Something that Alderman Tony Zielinski does not support.

"Right now we are having trouble enforcing the law with beaters and addressing public safety issues. Certainly going to create more ... taking more police officers is going to compromise the people in this community," says Zielinkski.

Zielinski has announced he is running for mayor next April. 

Despite Barrett’s proposal to reduce staff at the police department, he insists it’s in no way a knock against police officers. In fact, Barrett is also proposing an increase for police salaries.

"Next year, the increase in the police and fire budgets are larger than all other city departments combined," says Barrett. 

But the budget increases for Police and Fire, did not quell Zielinski’s concerns.

"That's not the criteria that should be used. The criteria that should be used for public safety is what's necessary to protect the people in this community," says Zielinkski. 

To address the problems the city of Milwaukee faces, Barrett is proposing, among other things, an increase in the tax levy by 3.5%. For the average taxpayer, that means an increase in $59 property taxes.

There will be a series of public hearings on the mayor's proposed budget. Then Common Council is expected to take up the budget for a vote in November.