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Keeping our commitment to Springfield’s police officers and firefighters is the right thing to do.
That’s why the Chamber’s Board of Directors decided in December to endorse the proposed Police/Fire Pension Fund Sales Tax Renewal that will appear before voters on April 8.
Due to the way the ballot is worded, a “NO” vote is required to renew pension funding. This is because of state regulations which require that the ballot ask voters if they wish to repeal the tax.
If the proposal passes, it will NOT result in a tax increase, as it is a continuation of the current ¾-cent sales tax.
A longstanding commitment
Springfield’s pledge to funding the Police/Firefighters Pension Fund dates back to 1946, when voters approved property taxes that would finance a self-funded retirement plan for police and firefighters in lieu of enrolling employees in the national Social Security system.
Decades later, the fund was experiencing a $200 million shortfall, in part due to an influx of retirees drawing on the plan and a lack of a dedicated funding source. In response in 2009, Springfield voters supported a ¾-cent sales tax to generate revenue for the fund, providing that the tax would sunset after five years or when the plan reached 100 percent funding, whichever came first.
Are we there yet? No.
As of July 2013, the plan was close to 70 percent funded, a significant improvement from the 40 percent funding level in 2009 – but still not at the 100 percent level required for a closed plan with no new employees paying into it.
While an 80 or 85 percent funded level may be considered healthy for open pension plans in the private sector, a closed plan like this one has no new employee contributions being added and has to reach 100 percent funding to be sustainable.
The plan’s actuary anticipates that it will take approximately five years for the pension plan to reach 100 percent funding, but this forecast may fluctuate depending upon the performance of the financial investment market.
The consequences of failure
According to Mayor Bob Stephens, renewal of the pension sales tax is necessary in order to meet state-mandates which if not met, would allow the state to withhold 25 percent of all city sales tax revenue collected by the state and place that revenue into the pension plan.
If the pension funding is discontinued, the city would have to transfer an additional $9 million a year out of general revenues to meet these legal requirements. This would result in cuts to public safety, including the elimination of neighborhood police patrols and intermittent closure of some police and fire stations.
Renewal is critically important at this time, and with a nearly 20 percent increase in violent crime in Springfield during 2013, cuts to public safety services as a result of not renewing the tax would be devastating.
Remember, vote NO and RENEW! It’s the right thing to do!