Afternoon Fizz: City Could Link Pension Plan with State's
The city could link its pension plan with the state's, under a new plan being considered by the legislature.
As we reported last Friday, the state is considering legislation that would give the state investment board the authority to manage the city of Seattle's retirement funds (along with the state's four other largest cities), increasing the city's return on investment by as much as 2.5 percentage points (the state yields an average of 6 percent, compared to the city's average of 3.5 percent—and the state's return is even better because the city's number doesn't factor in investment fees).
Seattle city employee unions are reportedly nervous about the idea of letting the state manage their funds because they believe state management will make them vulnerable to Republican demands at the state (as opposed to liberal Seattle) level to scale back public employee benefits.
The deal is being negotiated between city council member Tim Burgess and state Sen. Reuven Carlyle, who says, "I do not believe there's any meaningful risk associated with" the deal. "No one's shoving anything down anyone's throat."
Burgess, who initially resisted the deal, says that the city's financial "hole is so deep that investment performance alone is not likely to solve our problem, so that’s why we have to look at a wide variety of options."
Mayor Mike McGinn seems all in for the idea. He told PubliCola, "The state has consistently gotten better investment returns" than the city, "probably due to econonies of scale, or maybe they're just better investors than us. If the state can manage our money better than we can and get a better return, maybe it makes sense for them to do so."