CINCINNATI — Cincinnati’s pension system continues to fall behind, and the consequences on the city budget could be “devastating,” according to the Cincinnati Futures Commission report.
“Economic recessions coupled with consistent reductions in the city’s workforce through the years have significantly strained the financial picture of the pension system,” the report states.
In 1999, there was roughly one city employee for every retiree. That led to a system that was 161% funded.
Today, there are roughly 400 fewer employees for the same 4,300 retirees, the report states.
That has led to a pension-funded status of 65%, well below Ohio’s state system at 81%. Cincinnati is unique in that it’s the only city that manages its pension system locally.
That fact “correctly sounds some alarm bells among the Futures Commission, and it should sound alarm bells throughout the city,” attorney Steve Goodin said.
The former city council member represented the city on its 2015 Collaborative Settlement Agreement.
“The commission believes it is time for the city to solve its pension problem once and for all by prioritizing the full transfer of the city system to the state’s pension system,” Fifth Third Bank CEO and Cincinnati Futures Commission vice chair Tim Spence said on a call with reporters last week.
Goodin said transferring to the state is going to be a tall order: “Before the state would ever be interested, we would have to come up with a very big chunk of money to get it about on the level of where they are.”
The report estimates to increase Cincinnati’s pension system funded level to match that of the Ohio Public Employees Retirement System (OPERS), it would require a lump sum of at least $390 million, among other requirements.
To come up with that money, the commission recommends regionalizing Greater Cincinnati Water Works to support the pension’s transfer.
The sale could potentially net more than $680 million, according to the report, although experts tell WCPO they think that number may be lower.
Similar to the 2023 sale of the Cincinnati Railroad, it would require voter approval. The report states the process could take more than two years.
“The city’s waterworks is a nationally recognized asset that can create a major economic advantage to our region and to the city,” Spence said.
If the city doesn’t address its pension problem, the report states it could “have a devastating impact on the operating budget, forcing the City to cut services or raise taxes.”
“The 1.5% annual step up [proposed by the Cincinnati Retirement System’s Board of Trustees] would require an average yearly general fund contribution of $60 million — 48% of payroll — between FY25 and FY45.”
University of Cincinnati Political Science Professor David Niven said convincing voters to sell off additional assets after recently selling the railway may be difficult: “ There certainly is a danger, that Cincinnati voters are going to start to conclude that we’re having a fire sale on the city.”
The Cincinnati Futures Commission was established by Cincinnati Mayor Aftab Pureval in early 2023 and is composed of local business leaders. The group released a 77-page report last week examining and proposing potential solutions to Cincinnati’s budget deficit.
In a statement last week, Pureval said, “Many of the individual items will require vetting, public engagement, and an eye toward our vision of equitable growth.”
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