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Hartford Treasurer

Budget Gap-Reducing Idea May Violate Charter

Steven Goode

April 30, 2010

Recent suggestions by city and school officials about closing a budget gap by not making full pension contributions for city employees have prompted the city treasurer to remind them that doing so would violate the city charter.

In a memo sent earlier this month to council President Pedro Segarra, Treasurer Kathleen Palm Devine said that the city charter prohibits the council from reducing any appropriation necessary to fulfill the city's pension obligations as determined by the pension commission.

Segarra, however, said he isn't sure that Palm Devine is right.

"If the treasurer is correct that we have to fund our pension 100 percent, and if the pension took a $100 million hit, we would have to raise the mill rate accordingly," Segarra said, offering a hypothetical scenario. "That would mean the immediate death of this city."

But Palm Devine said Segarra's scenario couldn't occur because the city — one of three funding sources for pensions, along with employee contributions and investment interest income — does not fund the pension plan's asset losses.

"They're funding a portion of the pension payroll over the next 30 years," she said. "They're funding future benefits."

The pension commission has recommended that the city contribute $18.3 million to keep police, fire, general government, board of education and library pension accounts fully funded.

In March, as the city council discussed how to reduce what was then a nearly $27 million revenue shortfall, several suggestions, including reducing the city's contribution to the pension fund, were discussed. At a board of education finance committee meeting earlier this week, Superintendent of Schools Steven Adamowski also suggested reducing the school system's contribution to its pension fund to help close a $2.5 million revenue gap in his proposed budget.

Adamowski said he believes that as long as current retirees are receiving full benefits, the schools would not be "breaking the law."

Palm Devine said it's not unusual for city officials to ask to defer pension contributions, but suggesting it publicly caused her to send the memo.

"It was my attempt to respectfully remind them that the charter doesn't allow for this," she said. "It's a point I've made over and over."

Palm Devine said she understood that officials are looking for ways to save money, but suggested that a line-by-line examination of expenditures and reducing retirement benefits for future city retirees would be better places for city officials to focus their efforts.

Segarra declined to say whether he or the council would continue to consider partially funding the pension plan, but said he planned to meet with Palm Devine to discuss the issue.

"It's an issue that needs to be researched," he said.