Why is wealthy Westport trying to harm police pensions?

Monique Morrissey, an economist with the Washington, D.C., recently posted a blog about pension negotiations between the Town of Westport and Local 2080 of AFSCME Council 4. The case is now in arbitration. Here is an excerpt of Morrissey's piece, in which she questions the wisdom of continued efforts to reduce pension benefits for public safety officers. Click here to read Morrissey's full blog post.

Police in Westport, Connecticut are resisting an attempt to slash their pension benefits and partially replace their retirement with a 401(k)-style plan. Such a move would mess with a tried-and-true system that promotes secure and orderly retirement in favor of an inefficient one that harms workers without benefiting taxpayers.

Westport is a latecomer to a trend that appears to have nearly run its course. Cities such as Dallas, TX, Memphis, TN, Palm Beach, FL , and—closer to home—New London, CT that previously slashed pensions were later forced to restore benefits or spend millions on retention bonuses in efforts to stem outflows of experienced officers.

The pension gutting movement, which relied on shock-and-awe tactics and stoking the pension envy of taxpayers, lost some momentum as our organization and others pointed out that pension liabilities were being inflated for political purposes and that switching to 401(k)-style plans was unlikely to save taxpayers money in the long run.

Police and firefighter pensions are designed to recruit and retain career-minded candidates for jobs that require significant formal and on-the-job training—and then to encourage these officers and firefighters to retire at relatively young ages in recognition of the stressful and physical nature of these jobs. Westport’s police pension has served these needs well. While there virtually no mid-career turnover, 85 percent of officers are expected to retire between the ages of 54 and 61.

In contrast, with 401(k)-style plans, retirement income and timing depend on the vagaries of the stock market. If Westport slashes its police pension and adds a 401(k)-style plan, it will have trouble easing out older officers during bear markets, but could experience mass retirements during bull markets when labor markets tend to be tight and hiring replacements is more difficult.

Why would Westport mess with a system that works? The police department is tiny and the town can easily afford the benefits. In the 2015-2016 fiscal year, spending on police pensions amounted to just 1.2 percent of the town’s revenues, so even drastic benefit cuts wouldn’t noticeably affect anyone’s tax bill. Westport’s property tax rate is already among the lowest in the state, though taxes are high in dollar terms as would be expected for a wealthy town in a high cost of living area.

A few years ago, however, the conservative Yankee Institute dubbed Westport “an outlier among outliers” in terms of the pension and retiree health benefits provided to police and other town employees. Though this appears to have goaded some of the town’s elected officials into action, it simply isn’t true.

Pension benefits in Westport are standard for police officers not covered by Social Security, replacing 50 percent of an officer’s base salary after 20 years and 75 percent after 30 years, with police officers contributing 10 percent of their salaries toward the cost. While these benefits are better than many private-sector workers receive, they only partly compensate for lower public-sector salaries.

Some retired members received more valuable benefits, as is often the case for members of earlier “tiers” in an age of pension cuts. But further cutting the pensions of active members and new hires won’t reduce these legacy costs. And while pension critics sometimes have valid criticisms of pension “spiking” by workers who maximize overtime before retiring in order to boost pension benefits, this isn’t a problem in Westport, where overtime pay isn’t factored into pension benefits.

The 64 members of the Westport police department, who signed on for what they thought was a career of public service that would be rewarded with a secure retirement, may still pay a price, unless the citizens of Westport realize that that the police force they have come to rely on may be torn apart by shortsighted pension “reforms.”