Premium ContentMouse over Home then click on Premium Content for information.A new state law that changed the rules for determining public salaries was never intended to solve Omaha's $573 million pension crisis, a state senator said Monday.
"Does Omaha get out of the woods? No," said Sen. Brad Ashford, who helped craft Legislative Bill 397. "Omaha got themselves into a real fix on pensions. And you're not going to get out of that in this bill."
The bill overhauled the way the state labor board, the Commission of Industrial Relations, resolves public wage disputes by taking pensions and other benefits into account. The commission makes pay rates comparable to those in other cities of similar size.
Many had assumed the legislation would save Omaha significant money because of the city's generous police and fire pension. The World-Herald found, however, that the bulk of the pension is paid for by union members, not by city taxpayers.
The city's much bigger burden is in paying down its long-term debt of $573 million — payments that won't be considered under the new law.
That's by design, said State Sen. Steve Lathrop, the architect of the law. It would have been unfair to consider debt payments when evaluating a pension system's benefits, he said.
"That doesn't make it a bad bill. What it tells us is these pensions aren't as bad as we thought they would be," Lathrop said. "If the city government would have kept the plan funded, this problem wouldn't be there."
What the law will do, Ashford said, is make a trip to the CIR more predictable.
It also includes provisions to make more equitable comparisons between cities by setting guidelines for comparable cities and by adding a cost-of-living adjustment.
"What we tried to do was come up with a bill that would level the playing field, so you wouldn't have this situation where compensation was almost haphazardly determined," he said.
It takes a more holistic view of pay for public employees. If a city proves it pays an above-average portion of pension costs, the new law will allow the city to pay below-market wages to compensate.
That approach led many to believe that the bill would help Omaha out of its pension jam.
But the World-Herald analysis indicated the city pays less than 10 percent of payroll to fund fire employees' future pension benefits — less than the rate paid by several other cities of roughly the same size. Firefighters pay 16 percent of their salaries into the system, a higher rate than firefighters in other cities studied.
Tim Stuart, legislative counsel for the Greater Omaha Chamber of Commerce, said no one discussed the city's share of pension costs compared with other cities as the bill was being drafted.
There were a lot of unknowns about how specific parts of the wage formula would play out in an actual CIR case.
"During the debate, nobody knew for sure. No one could say 'Here's what's going to happen,' " Stuart said.
The newspaper used a less complex approach to evaluate pension costs than would be used in an actual case. The approach didn't account for some variables such as the age makeup of a city's workforce and differences in assumed investment returns.
After working on the legislation for more than a year and hearing all about those complications, Lathrop said, he was reluctant to agree with The World-Herald's findings without a full actuarial analysis of pension costs.
Such a process would cost roughly $10,00 for each city analyzed.
Contact the writer: 402-444-3144, matt.wynn@owh.com
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