Pensions: a McLaughlin-Rybak flashpoint

The Minneapolis Police Relief Association (MRPA), a closed pension fund, has been a political flashpoint in the mayor's race.

Challenger Peter McLaughlin said Rybak dropped the ball on a pension fix, failing to take an MPRA-brokered legislative deal in 2004 that would have saved the city millions of dollars and potentially put more cops on the street before this year's crime surge.

The bill required local approval, and Mayor R.T. Rybak and the City Council majority rejected it with hopes of getting broader pension reforms. The mayor and Council took the police deal in 2005, with some modifications.

Rybak said the one-year delay improved the bill. McLaughlin disagrees, saying the delay shows the mayor's lack of political savvy.

Debt and relief

The city has three closed pension funds: MRPA; the Minneapolis Firefighters Relief Association (MFRA); and the Minneapolis Employees Retirement Fund (MERF). (Closed funds don't add new members.)

During the 2000-2003 stock market drop, unfunded MERF and MPRA liabilities got so big that, starting in 2002, the city began borrowing to fund legally obligated reserves. By the end of 2004, the city had issued nearly $120 million in pension bonds, a city report said. More debt was coming.

The mayor appointed a Blue Ribbon Commission to review options. Its report said police and fire fund members controlled investment and benefit decisions, but city taxpayers were on the hook when those bets went bad or management was weak.

The Commission's October 2004 report recommended merging the city's pension funds into the state-run Public Employees Retirement Association (PERA), a move the funds strongly opposed.

The MPRA pushed its own legislative fix in 2004. It extended the city's full funding date from 2010 to 2020 - like extending a mortgage, it reduced the city's annual costs, but pushed costs into future years. The plan also lengthened state aid payments. The plums for pensioners: an additional $86-a-month raise, a prohibition on future pension cuts and an easier-to-get "13th check," a bonus that pensioners receive in good investment years.

Ed Burek, deputy director of the Legislative Commission on Pensions and Retirement, said the 2004 and 2005 bills are similar, though the city got a "marginally better" deal by waiting.

Instead of giving a raise all in one year, it was spread over two years, he said. The 13th check changes did not pass. The 2005 bill accelerated the date MRPA goes into trust, away from board control, a move the city believes better protects its financial interest.

Said Rybak: "We want to get to the point where there is professional management taking over these funds. That will happen sooner."

Two rights

Rybak said the city made more money by waiting a year. McLaughlin said the first deal was more valuable. In a way, both are right.

The 2004 bill would have had a saved $22 million in today's dollars over the next 15 years, the city's Finance Department said; the 2005 bill saves an additional $1.3 million over 30 years.

MPRA attorney Brian Rice said waiting a year to finish the deal changes the payout structure, similar to prepaying a mortgage. The 2004 deal would have provided a larger immediate cash infusion - but meant larger city payments 2010-2020.

McLaughlin said the 2004 deal would have freed up more money to hire cops to deal with the current crisis. "If he [Rybak] had made a decision last year, he could have recruited a [police recruit] class. They could have been trained. They could have been ready to go," McLaughlin said.

Further, the one-year delay cost the city other pension reforms, he said.

In 2005, the Legislature shot down MERF changes at the last minute, which would have saved the city approximately $22 million in today's dollars over the life of the fund, according to the Blue Ribbon Commission. McLaughlin said legislators didn't want to give Minneapolis both police and MERF, or more "bites at the apple."

If the city would have taken the police deal in 2004, it could have gotten MERF in 2005, he said.

The city could still get the MERF bill in a special session or in 2006, but it will take more lobbying.

Rybak said he wanted to continue to look at ways to get the larger pension reforms, while McLaughlin appeared disinclined to back the Blue Ribbon Commission's recommendations.

"The fire fighters pension fund is in better shape than the state pension fund. PERA is not in good shape," he said. "I don't think it is necessarily better management over there at the state."

On the campaign trail, Rybak touts his use of one-time money, such as year-end surpluses, to pay off pension debt - $27.5 million from 2004-2005, and another $10.1 proposed in 2006. That reduces the city's annual debt payment, freeing up money on a year-to-year basis for public safety, he said.

Pensions: a McLaughlin-Rybak flashpoint

The Minneapolis Police Relief Association (MRPA), a closed pension fund, has been a political flashpoint in the mayor's race.

Challenger Peter McLaughlin said Rybak dropped the ball on a pension fix, failing to take an MPRA-brokered legislative deal in 2004 that would have saved the city millions of dollars and potentially put more cops on the street before this year's crime surge.

The bill required local approval, and Mayor R.T. Rybak and the City Council majority rejected it with hopes of getting broader pension reforms. The mayor and Council took the police deal in 2005, with some modifications.

Rybak said the one-year delay improved the bill. McLaughlin disagrees, saying the delay shows the mayor's lack of political savvy.

Debt and relief

The city has three closed pension funds: MRPA; the Minneapolis Firefighters Relief Association (MFRA); and the Minneapolis Employees Retirement Fund (MERF). (Closed funds don't add new members.)

During the 2000-2003 stock market drop, unfunded MERF and MPRA liabilities got so big that, starting in 2002, the city began borrowing to fund legally obligated reserves. By the end of 2004, the city had issued nearly $120 million in pension bonds, a city report said. More debt was coming.

The mayor appointed a Blue Ribbon Commission to review options. Its report said police and fire fund members controlled investment and benefit decisions, but city taxpayers were on the hook when those bets went bad or management was weak.

The Commission's October 2004 report recommended merging the city's pension funds into the state-run Public Employees Retirement Association (PERA), a move the funds strongly opposed.

The MPRA pushed its own legislative fix in 2004. It extended the city's full funding date from 2010 to 2020 - like extending a mortgage, it reduced the city's annual costs, but pushed costs into future years. The plan also lengthened state aid payments. The plums for pensioners: an additional $86-a-month raise, a prohibition on future pension cuts and an easier-to-get "13th check," a bonus that pensioners receive in good investment years.

Ed Burek, deputy director of the Legislative Commission on Pensions and Retirement, said the 2004 and 2005 bills are similar, though the city got a "marginally better" deal by waiting.

Instead of giving a raise all in one year, it was spread over two years, he said. The 13th check changes did not pass. The 2005 bill accelerated the date MRPA goes into trust, away from board control, a move the city believes better protects its financial interest.

Said Rybak: "We want to get to the point where there is professional management taking over these funds. That will happen sooner."

Two rights

Rybak said the city made more money by waiting a year. McLaughlin said the first deal was more valuable. In a way, both are right.

The 2004 bill would have had a saved $22 million in today's dollars over the next 15 years, the city's Finance Department said; the 2005 bill saves an additional $1.3 million over 30 years.

MPRA attorney Brian Rice said waiting a year to finish the deal changes the payout structure, similar to prepaying a mortgage. The 2004 deal would have provided a larger immediate cash infusion - but meant larger city payments 2010-2020.

McLaughlin said the 2004 deal would have freed up more money to hire cops to deal with the current crisis. "If he [Rybak] had made a decision last year, he could have recruited a [police recruit] class. They could have been trained. They could have been ready to go," McLaughlin said.

Further, the one-year delay cost the city other pension reforms, he said.

In 2005, the Legislature shot down MERF changes at the last minute, which would have saved the city approximately $22 million in today's dollars over the life of the fund, according to the Blue Ribbon Commission. McLaughlin said legislators didn't want to give Minneapolis both police and MERF, or more "bites at the apple."

If the city would have taken the police deal in 2004, it could have gotten MERF in 2005, he said.

The city could still get the MERF bill in a special session or in 2006, but it will take more lobbying.

Rybak said he wanted to continue to look at ways to get the larger pension reforms, while McLaughlin appeared disinclined to back the Blue Ribbon Commission's recommendations.

"The fire fighters pension fund is in better shape than the state pension fund. PERA is not in good shape," he said. "I don't think it is necessarily better management over there at the state."

On the campaign trail, Rybak touts his use of one-time money, such as year-end surpluses, to pay off pension debt - $27.5 million from 2004-2005, and another $10.1 proposed in 2006. That reduces the city's annual debt payment, freeing up money on a year-to-year basis for public safety, he said.