Letter: 'Greenwich’s Budget: There is no accountability!'

I decided to spend some time going through the town’s budgets for the last couple of years to better understand Greenwich’s resource decisions. As a result of some of my analysis, I thought it would be important to begin a dialogue with Mr. Tesei (unfortunately I still have not heard back from him) to communicate some very real concerns I have and believe I share with other Greenwich residents. The core of my concerns centers on the allocation of the town budget to employee pension, healthcare and post-employment benefits, to, what seems like, the detriment of education, amongst other services. 

According to Greenwich’s budget for the periods ending June 2011 and 2012, ~50% and 116% of Greenwich’s incremental revenue for 2011 and 2012, respectively was allocated to employees’ Pension, Healthcare costs & Other Post Employment expenditure. The pension contribution/expense increased by ~$3.6million (or 49% y/y) and ~$3.7 million (or 33% y/y) in 2011 and 2012, respectively because of poor stock market investment. I am deeply concerned that the town is asking residents to back stop these losses and bear 100% of this burden. As we all know, private sector employers do not top up, or make whole, employee 401Ks because of poor investment decisions. Those are the risks we all knowingly accept when we decide to become consumers in the financial markets. Compounding the slippery slope of this approach is that according to the Fiscal 2013 budget, this burden is expected to get worse going forward. The Pension Contribution for 2013-2014 is currently projected to be at $19.8M, up ~37% from ~$14.4 million today. 

We are, as the numbers indicate, at a point where Pension, Healthcare and Other Post Employment expenditure consume 21% of Greenwich’s total revenue, up from 15% in FY 2002, while the education budget has remained essentially flat as a percentage of Greenwich’s total revenue over the comparable period, while other basic services have suffered. Greenwich’s Pension, Healthcare and Other Post Employment expenditure now represents 55% of Greenwich’s School budget, up from ~39% in FY 2002. This trend is extremely alarming given some of the commentary in the latest budget, which suggests that a greater share of revenue is expected to be allocated to Pension, Healthcare and other Post Employment expenditure going forward.

1. I am extremely confused as to why Greenwich children as well as residents should suffer as a result of liabilities/obligations residents did not create in the first place. Current data indicates these shifting priorities might already be having an adverse effect. Apart from a few high performers, schools in Greenwich do not fare as well as one would expect given the Town’s high revenues.
     
   I’m confident most residents would rather have their tax paying dollars utilized towards resolving some of the biggest complaints and major priorities, which include improving education, basic services as well as speed enforcement. Across the country deals are being reached to rein in public pension costs and require public employees to do as their private sector counterparts have been doing for decades and chip in more to their retirement plans. I believe strongly the time to begin to address these issues and change the trajectory is now.
     
   The Board of Estimates and taxation (BET) letter of November 13, 2012 reinforces many of my concerns:
     
   1. The Town of Greenwich Labor rates increases are simply too high compared to other regions (NY‐NJ‐CT‐PA);
      
   2. The Town’s current medical healthcare benefits are classified as “Cadillac Plans” and if the Town’s employees don’t participate more in the cost of medical coverage, Greenwich residents will face an even larger financial burden;
    
   3. The Town has had to make increasingly larger contributions to the Defined Benefit Plan. These increases come within a context of significant underperformance by the plan’s assets. The Town of Greenwich Pension Plan Performance is in the bottom quartile for fund performance when compared to other public plans (selected by NEPC, the Plan’s Financial Advisor) for the past 3, 5, 7 and 10 year periods. For the 10 year period, when compared to the performance of other Defined Benefit Plans, Greenwich’s plan is in the bottom 10%. Something has to change.

How it is possible that Greenwich’s defined pension for the 10 years is in the bottom 10% when we live among some of the best money managers in the world? Who is responsible for making the decision to continue the investment with whoever is managing it now? And what is the definition of that accountability? In short, how are we measuring and defining success?

We all care about the quality of life in Greenwich. Therefore, I am sure we all share the common goal of protecting and preserving the brightness of our children’s futures and the prosperity and excellence of our town. 

Warren Silver