What the transfers have in common is that they all draw from funds previously budgeted for the District’s retiree health-care fund. Mendelson has questioned whether the city should draw cash away from its retiree obligations to pay for anything.
The health pool is underfunded — unlike the city’s pension funds, which are mostly overfunded — and the District is on a 30-year plan to get the reserve back up to muster.
The Gray administration argues that the most recent analysis shows that the city has more than enough money to meet its obligations under that plan — only $89.9 million is needed this year, rather than the $107.8 million budgeted — and the surplus can be diverted to current needs, including new trash cans.
“Right now, there’s no reason to overpay into the account,” said Pedro Ribeiro, a spokesman for Gray (D).
“We’re not in a situation where we need to do that,” Ribeiro added.
But Mendelson said it’s a bad idea to skimp on the funding when the health plan remains actuarially wanting. “Why 30 years?” he asked. “Why not 20 years or 15 years? If we’re interested in ensuring that our retirement fund is healthy, then we shouldn’t be waiting 30 years to fund it or take money out of it now.”
“This is how these retirement trust funds have gotten into trouble in other cities,” Mendelson added.
“You change the assumptions to free up money for other purposes, and that’s neither prudent nor the path to fiscal good health.”
In a Friday letter to Mendelson, Gray’s budget director said that changes in investment performance and retiree participation led to the lower required contribution.
If the council rejects the budget transfers, it could be hard for Gray to find another source of unspent funds big enough to fund the trash-can rollout.
Ribeiro said Thursday that he was hopeful Mendelson’s concerns could be quickly assuaged. “We think once we talk to the chairman we can move this forward,” he said. “We’re doing exactly what the District’s residents want.”