December 12, 2012
District’s initiative in developing and promoting a framework for pension reform is a model for local governments
In an analysis released today, the Civic Federation supports the Metropolitan Water Reclamation District’s (MWRD) FY2013 Tentative Budget of $1.1 billion which continues a comprehensive effort to control rising personnel costs. The budget also holds the tax-capped portion of the District’s property tax levy flat. The full 47-page report is available at civicfed.org.
Efforts to control personnel costs in the FY2013 budget include reform of the District’s pension fund, increased cost-sharing for healthcare costs and a reduction in staff headcount and related expenses. “Among local governments in our region, the District is a leader in recognizing and addressing threats to long-term fiscal sustainability,” said Laurence Msall, president of the Civic Federation.
The FY2013 budget reflects recent efforts by the District to address underfunding of its pension and healthcare costs. In 2012 the MWRD Board and pension fund leaders successfully petitioned for pension funding reforms to increase both employee and employer contributions to a more actuarially sound level. The Civic Federation commends the District for successfully developing and promoting a framework for pension reform. The effort serves as a model to other local governments with deteriorating pension funds.
The MWRD Board also recently approved a ten-year plan to gradually increase healthcare cost-sharing for retirees and employees. By conscientiously evaluating its financial practices, the District will significantly increase the stability and sustainability of healthcare coverage for employees and retirees.
While praising the overall direction of the budget, the Federation expresses concern regarding the District’s practice of budgeting well in excess of anticipated expenditures for its Reserve Claim Fund to cover emergencies or large settlements. Instead of basing this appropriation on anticipated costs, the District allocates all available resources to the fund. In FY2013 this results in an appropriation that exceeds reasonable anticipated costs by over $50 million, based on historical trends of actual expenditures.
The Federation recommends a more realistic appropriation for the Reserve Claim Fund to communicate a more accurate picture of the District’s financial plan to the public and policy makers. The Federation also recommends that the District improve its budget documents by providing greater detail on total revenue collection and staffing levels as well as a full narrative description of changes made between the District’s two publicly released budget documents: the Executive Director’s Recommendation and the Tentative Budget.