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Retirement funding crisis looms for city
The Mercer Island City Council should consider finding a reliable, long-term revenue source to fund its obligation to police and firefighters under an old state retirement system.
The City of Mercer Island is responsible for covering 36 retired members under the state's old Law Enforcement Officers and Firefighters plan 1, which was in effect from 1970 to 1977. Referred to as the
LEOFF 1 plan, it states that cities are responsible for paying the medical costs and benefits for employees covered under the plan for life. There are four current city employees eligible for the plan when they retire.
The city has been paying out benefits on an as-needed basis. Costs for the retirees were about $300,000 in 2003 and estimated at $430,000 for 2004. That amount could nearly double by 2023, to more than $800,000 a year as more members on the plan age, retire and require more medical care.
How to pay the benefits and long-term care is a subject that is expected to be covered at the City Council's next retreat. The city's finance director outlined several options in a presentation last month: Continue on a pay-as-you-go basis; pay pension costs with surplus cash, but continue paying medical costs as they come up; or determine a long-term funding strategy.
It's good that the council is discussing how to deal with the problem before it becomes a major burden on the city's budget. However, the council should seriously consider finding a reliable source to save for the growing costs for the retirees now, rather than depending on future surpluses. Surpluses come and surpluses go, but the obligation is always there. The long-term funding strategy seems to make the most sense.