Memphis City Council members were told that planning for the 2015 budget will not be “business as usual” as the city begins to fill the $709 million gap in the city’s pension fund.
City finance director Brian Collins gave council members Tuesday a hypothetical mix of budget cuts and tax increases to fill the gap over the next five years. However, Collins said no new taxes are planned for Mayor A C Wharton’s proposed budget for fiscal year 2015.
With that, he said, they’ll likely rely heavily on cuts. The city has hired national financial advisory firm PFM Group to take what Collins called an “exhaustive look” at the city’s budget to find places to cuts.
As the recession took big bites out of the pension fund, the council needed to contribute more to keep the fund whole. However, as the gap grew, the council kept to the $20 million contribution it had paid for years before the recession.
Collins said the city needs to make $100 million in annual contributions. He suggested ramping up payments over the next five years to get to the $100 million goal. With that, the city would pay $35 million to the fund next year, $50 million the next, $60 million in the next year, up to $80 million and finally to $100 million. This process would help stop the growth in the fund’s gap.
The additional $15 million for the fund next year will have to come from somewhere, Collins said, and tough choices are ahead for council members as they plan for next year’s budget.
“What is clear is that we cannot continue with business a usual,” Collins said. “But I can’t say enough that we‘re not including taxes in the planning for 2015 budget nor are we including tax increases in any contemplated measure for pension reform.”
