WITH ONLY two weeks left in the fiscal year,
the District's pension plan for uniformed employees and teachers is still about $12.7 million short. Frank Higgins, chairman of the D.C. Retirement Board, says the city government must contribute that money to the pension fund immediately if the board is to cover the checks due retirees for the remainder of the fiscal year. But city officials demur. They say the fund's shortage should be made up with money that the fund has in reserve to pay future debts. Mr. Higgins has responded that the pension fund's "corpus" was not meant to be used for yearly disbursements; the city's annual pay-as-you-go contributions are intended to cover that debt, he says.
This dispute goes back nearly a year, when it became apparent that the actuarial projections for what the city should contribute to the pension fund this year came up short. The city had made its contribution to the fund on the basis of those projections, and city officials, in the midst of a budget crisis, protested that they had fulfilled all their legal obligations by paying the amount the actuary stipulated; if the actuary made a mistake, they said, it was not their fault. A report from the American Law Division of the Congressional Research Service supports the city's position that it is not liable for the $12.7 million shortage.
How will the $12.7 million be made up? City officials correctly note that the actuary could take the deficit into account when computing the necessary city contribution to the fund for future years. But right now the pension board's position is still that it will not make pension payments once the money from the city's annual contribution runs out. The pension board is right to oppose any attempt by the city to put off making its full pay-as-you-go contribution for this year. In any case, pensioners have to be paid.
Unfortunately, this is not all that ails the pension system. New actuarial studies show that the fund's unfunded liability has almost doubled from the last estimate of $5 billion. That liability represents the portion of the pension fund that was not funded by Congress in 1979 when it passed a bill meant to take care of pension debts incurred before the District had authority over its pensions.
Congress should act to cover these pre-home rule obligations. But the city cannot pressure Congress to do its part if the local government is not making every effort to meet its own obligations to the fund. The city should have replaced the $12.7 million for this year when it first got the news.