Cincinnati, Ohio – The state of Cincinnati’s pension system is causing concern as it falls behind, posing potential devastating consequences for the city’s budget, according to a recent report released by the Cincinnati Futures Commission. The report highlights how economic recessions and a decrease in the city’s workforce over the years have significantly impacted the financial stability of the pension system.
Back in 1999, there was approximately one city employee for every retiree, resulting in a pension system that was 161% funded. However, today, with about 400 fewer employees serving the same 4,300 retirees, the system’s funded status has dropped to 65%, well below the state of Ohio’s system at 81%. Cincinnati is notably unique in managing its pension system locally, raising concerns among city officials and financial experts.
The Cincinnati Futures Commission is calling for urgent action to address the pension problem by considering transferring the city’s system to the state’s pension system. This move is viewed as a challenging task, requiring a significant financial commitment to align with the state’s standards. The estimated cost to match the Ohio Public Employees Retirement System’s funded level would amount to at least $390 million, presenting a considerable financial hurdle for the city to overcome.
One proposed solution highlighted in the report is the regionalization of Greater Cincinnati Water Works to generate funds needed for the pension system transfer. The potential sale of the waterworks could bring in substantial revenue, although experts suggest that the actual proceeds may be lower than estimated. However, this strategic move would require voter approval, similar to the 2023 sale of the Cincinnati Railroad, and could take more than two years to complete.
Failure to address the pension issue could lead to dire consequences for Cincinnati’s operating budget, potentially forcing the city to cut services or raise taxes to bridge the funding gap. With proposals like the 1.5% annual step up in contributions, city officials are faced with the challenge of securing significant financial resources to support the pension system in the long term. Convincing voters to support additional asset sales may prove to be a tough sell, especially following recent city asset sales.
The Cincinnati Futures Commission, an entity established by Mayor Aftab Pureval, composed of local business leaders, aims to address the city’s budget deficit through carefully considered solutions. The group’s comprehensive report provides insights and recommendations to guide the city towards sustainable financial stability, emphasizing the importance of public engagement and equitable growth in the decision-making process.