Spurred by the not-so-simple task of curbing costs while retaining strong employee benefits, Metro is hiring a consultant firm to advise on matters ranging from the future of city workers’ retirement pension plans to their health insurance.
Metro’s five-member Study and Formulating Committee, appointed earlier this year by Mayor Karl Dean, unanimously voted to issue a request for proposals in search of a third-party consultant to advise on potentially far-reaching changes to Metro’s employee benefit system. The firm could be hired within the next 30 to 60 days.
The committee, which the mayor is required to appoint every five years by Metro Charter, has been tasked to provide recommendations at a time when municipalities across the nation are coming to grips with higher costs to maintain employee benefits during a slumping economy.
In a memo delivered to committee members Thursday, Metro Finance Director Rich Riebeling asked members to take a “broader view” than it has in the past to “explore whether it is appropriate to propose wide-ranging changes that are more financially sustainable” for Metro and its taxpayers.
Any changes the committee recommends would ultimately be subject to Metro Council approval and Dean’s signature. Tackling the financial strains of employee benefits costs figures to be one of Dean’s most strenuous second-term challenges.
Riebeling stressed he “fully supports” a strong system of benefits for employees. Nonetheless, his message seemed to paint a dire picture in terms of sustainability.
“I have come to realize that government cannot continue operating as it has in the past,” he wrote. “It’s difficult for me to anticipate revenue growth in future years continuing at levels we’ve seen in the past.”
The finance director concluded his memo by citing three areas that warrant examination: the costs of pensions, health insurance and compensation for injuries while employees are on duty.
One controversial item on the table is whether to change Metro’s current five-year vesting period to receive pensions to 10 years. Another option — among many — could be changing the pension plans of Nashville Electric Service and Metro General Hospital workers from defined benefit plans to defined contribution plans, Riebeling said.
Steve Farner, a committee member who works as an assistant regional manager for the Laborers’ International Union of North America, said it’s important the interests of employees are considered and factored into all calculations. Still, he acknowledged the ongoing employee-benefit discussion is different than in past years.
“Because of the setting we find ourselves in and the economy and the tax revenues, it may cause this particular committee to have to look more seriously at it,” Farner said.
In an interview with The City Paper, Riebeling said a consultant firm would allow committee members to analyze approaches undertaken by other city governments. He said the hope is to strike a “balance” by factoring in declining revenues while still providing quality benefits to employees.
“It’s fair to say that costs aren’t going down,” Riebeling said of the city’s employee benefit system. “It seems to be rising at higher levels than most other parts of government.
“We’re sort of in this period where the new normal of revenues is going to be pretty modest growth,” he added. “You’re not going to see the type of growth in revenues in local governments or state governments that we saw in the ’90s and 2000s. So, you have to take a hard look of where your resources are.”