On Sunday, January 8th at about 2PM I received an email from Bud Sizemore of the Council of Fire Fighters with an attachment which proved to be a draft merger bill. Click here for a copy.
The meeting was conducted on Monday, January 9th at the WACOPS office in Olympia.Steve Nelsen, the LEOFF II Board Director made the initial presentation which was explanation of how this draft was developed and how it differs from HB 2097 which died in the last session of the legislature.
History and Development
Steve reported that he was contact by Rep. Pat Sullivan, pat.sullivan@leg.wa.gov, and asked to draft a new merger bill based on HB 2097 but addressing four specific items not properly addressed in the original bill.Rep. Sullivan is the Majority Leader for the House.
1.Clearly include protection of all LEOFF I benefits including the Disability Boards.
2.Adjust the LEOFF II pension contribution rates to save the maximum amount possible for the state.
3.Indicate how the pension liabilities would be spread in the future.
4.Insure that the authority to set rates and assumptions is vested solely in the LEOFF Board and not subject to change by the legislature.
If you read through the draft bill you will see on page 4 a new section, SECTION 5, which purports to address item 1.Read this section carefully.I do not think it meets the goal.It addresses 41.26.150 benefits but not 41.26.030 benefits and it does not do anything to guarantee the ongoing existence of local Disability Boards.Beyond that it can be read in such a way as to suggest that all LEOFF II members would be entitled to the LEOFF I benefits once the merger is complete.I sure they would say no, but I think the language is so vague as to invite a lawsuit by LEOFF II to secure those benefits.
The bottom line is that this effort does not meet standard as detailed in item 1.
Item 2 is dealt with on Page 1 in Section 1.It effectively eliminates any state contribution to the LEOFF II system for this biennium – it lowers the state rate to 0%.Representative Sullivan wants to get this bill passed and signed by the Governor by the end of January.Since the bill has an emergency clause, Page 22, Section 22, it would take effect immediately.That would save the state about $80 million this biennium.And that, my friends, is why this bill is so dangerous.$80 million is a lot of money when there is a budget crisis in play and even though the whole idea is bad public policy, the money can be very tempting.
Item 3 is dealt with in page 10, Section 10 where it indicates that the funding ratios at Employee contributions 50%, Employer contributions 30% and State contributions 20%.What this means is that if the LEOFF I pension plan were to go into deficit for any reason the burden for payment of the pension would rest on the active employees, employers and the state would have to shoulder only 20% instead of the 100% they are currently responsible for.How about that you LEOFF II readers – thanks for picking up our tab.
Item 4 is mentioned several times throughout the document. This is really important to the LEOFF II Board.They do not want the legislature to have the authority to set LEOFF contribution rates or assumptions.It is an understandable goal as we have all see pension systems that were not properly funded because the legislature wanted to use the money for other things.The LEOFF I system was left unfunded by the state for five years before the state started to address their responsibilities and the system was so fare in deficit that they created LEOFF II.
But, the legislature is not generally willing to cede their legislative authority to anybody – let alone a board made of primarily of members of the very pension system they are governing.This restriction of legislative authority was a part of Initiative 790 that created the LEOFF II Board.The legislature quickly got rid of that authority and the LEOFF II Board has been trying to get it back ever since.In this version the authority has been soften a bit to require that the Actuary finds the decision reasonable.The legislature would not be able to change the LEOFF board action if the Actuary says it is reasonable.
While I understand the desire to gain control of the rate and assumption settings and remove those responsibilities from the legislature, it just does not seem appropriate to vest that responsibility in an unelected board with a majority of members within the system being governed.A sweet deal for the governed but a bad public policy.We would be surprised if this provision would survive and we suspect it will be very helpful on killing the bill altogether.
There are lots of other items in the draft bill that amount to changes from HB 2097 but the overall thrust is the same.
What’s missing?
One of the biggest objections to HB 2097 was that it would place the governance of the LEOFF I system under the authority of the LEOFF II Board.The only thing that would be changed is the name.Instead of the LEOFF II Board it would become the LEOFF Board.All appointments to this board are made by the Governor but the only people who can nominate members for the Governor’s consideration are the Washington Council of Fire Fighters and WACOPS.Not FOP, not COMPAS and certainly not the Retired Fire Fighters or Retired Seattle Police or anyone else.It is very blatant language and was carefully crafted in the initiative that created the board.There is no way under this system of governance that LEOFF I members could have an effective voice.
This governance structure would be a deal breaker even if there was some merit to the rest of the merger concept – and there isn’t.
No changes in the governance structure is proposed in this draft merger bill.
Bottom Line
I would urge you to read the draft bill.You will see that it has no significant change from HB 2097.All of the arguments we voiced about that still hold.We believe it is illegal, we believe it is bad public policy, we believe it should be stopped dead in its tracks.
That means, should this bill actually be put forward, we will be back into a lobbying effort.So take some time and look up you Representatives.Write them, call them, meet them and ask them to refuse to support the merger.Ask them to just leave LEOFF I alone.
LEOFF I ain’t broke – don’t fix it.