Photo: Belmont should not continue to pursue a pension pay down plan. (credit: Pixabay)
Letter to the editor:
It looks like the defeat of the override will lead to the loss of several school teachers, at least one fire fighter and police officer, and several DPW employees, as well as cuts to many important services for seniors and others. I’m guessing that even those who opposed the override will consider this prospect to be unfortunate.
With this in mind, it is absolutely critical that we identify any moves we can make to free up money in the budget. While it would be nice to do so, we can no longer afford to achieve 100 percent funding status on our pension liability eight years before we have to. According to an October 2020 report by the Segal Group, we are currently spending almost $9 million a year to reduce our pension liability and will boost this expenditure by about 4.5 percent annually until it hits $13 million in 2031 to eliminate the liability by 2032. If, as we are free to do under the applicable state law, we adjusted our full funding target date to 2040, we could free up at least several hundred thousand, if not more than $1 million, a year. This adjustment would enable us to avoid some painful budget cuts, lower our structural deficit and the size of the next override while preserving our commitment to provide the pensions we promised to our employees.
If you think that Belmont should not continue to pursue a pension pay down plan aimed at achieving full funded status several years ahead of when it is legally required, please ask the Select Board, the School Committee, and the Town Administrator to reach out to the Retirement Board, which determines the pension funding schedule, and request that it extend the full funding target date to 2040.
Dan Barry, Town Meeting Member, Precinct 1, Goden Street
Dan Barry says
I agree that pushing out the date by which we achieve full-funding status on our pension liability will increase the total amount we end up spending to get to this place. It is similar to how you end up paying less on your mortgage if you eliminate it over 15 years instead of 30. However, a couple that has made the switch to a 15-year mortgage who then unexpectedly learn they will be having twins might decide to go back to the 30-year payment plan. Belmont didn’t have any babies but it has experienced tremendous growth in its student enrollment over the last ten years, requiring it to hire more teachers (and, ultimately, to construct a Grade 7-12 school) to avoid class sizes becoming so big that they reduce Belmont’s appeal to prospective homebuyers (and thus imperil our property values). When driving, a tap on the brakes can often keep you out of big trouble. I think Belmont might want to consider that point with respect to its pension funding strategy. Thanks!
Thomas Curran says
Some good thoughts, but I believe these costs are due to the past kicking the can down the road. No exercise is a waste and continuing discussion may bring a resolution. As far as pensions let’s stay the course , and finish what’s been laid out. When its objective is met payment responsibility will drop significantly. Like previously stated thanks for the work and creative thinking
Dan Barry says
I agree that our pension funding problem resulted from kicking the can down the road. At a 2014 presentation on the issue, town officials noted that, from. the 1930s to the 1990s, Belmont put no money aside for the liabilities in faced in this area. The town started to very aggressively throw money at this issue about ten or twenty years ago. The funding escalator used to be over 7% per year. Now it is 4.5%, which is much easier to handle but is still higher than our annual revenue growth rate -meaning that, each year, this budget item puts an ever tightening squeeze on our school and town-side expenditures. The bottom-line is that we’re trying to solve a problem that was six or so decades in the making in a relatively small amount of amount time. I could be wrong, but, since we can legally give ourselves another eight years to meet this challenge, I think we should do so. Both our taxpayers and our school children would benefit from this course correction.
Hi Dan thanks for raising this topic and for proactively looking for ways to alleviate the coming budget crunch. I’m not well versed with this topic so perhaps I’m missing important context, but this looks like it would incur a ton of long term pain for relatively limited short term gain.
Taking your numbers at face value, the total cost to retire our pension liabilities would be almost twice as high under the 2040 scenario (225M vs. 121M) vs. the current plan. In exchange for an average of 1.5M / year of relief over the next ten years, we’d be signing up for almost 15M (!!!) a year of new spending between 2032 and 2040. These numbers are rough approximations based only in the figures in your letter, but if they’re even close to accurate then this seems like a very bad deal.
Funding cuts to schools, public safety, seniors, and public services are a shame, but ultimately something that Belmont can manage through. Even without the override, Belmont will still be a great place to live and work 10 years from now (even if our roads have a few more potholes, or our elementary classrooms average 18 vs. 17 kids). Kicking the financial can down the road will make these problems worse, not better. Saving 1.5M / year over the next decade is just not worth burdening the next generation of Belmont families with an annual bill ten times that high.
Am I misunderstanding the choice here, or are my numbers way off?
Again, thanks for you work and creative thinking here. We need people like you doing the work to figure out ways to make our town better and manage through the tradeoffs that come hand in hand with the lower taxes we voted for. My gut is that I don’t agree with you on this specific topic but I’m open to changing my mind if my numbers are off.