FAYETTEVILLE -- The city's old firefighter pension fund can be combined with the statewide pension program, the Arkansas attorney general said this week, though the city attorney has long disagreed.
Attorney General Leslie Rutledge said Fayetteville wouldn't violate the Arkansas Constitution by consolidating the Firemen's Pension and Relief Fund with the larger and sturdier Arkansas Local Police and Fire Retirement System, commonly referred to as LOPFI. The fund's board asked the City Council last year to allow the combination in a last-ditch effort to save the fund, which pays benefits to about 50 former firefighters or widows and is losing money faster than it's replenished.
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City Attorney Kit Williams warned the combination could go against the state constitution's ban on a city government's extending its credit to any organization -- in this case, the pension board -- and the council set aside the question until this spring.
If the consolidation happens, Fayetteville could be charged an unknown amount of money to pay for benefits not covered by LOPFI's revenue, which Williams said was equivalent to extending credit. Violating the constitution, meanwhile, could be expensive in its own way by exposing the city to legal penalties.
Rutledge said such worry was misplaced. The pension fund is the city's obligation, she said, noting the board includes city officials, the fund is held by the city treasurer and a 0.4-mill city property tax partly pays for it.
"The foregoing provisions all suggest that, while the board is responsible for administering the fund, the obligation to retired firemen is ultimately the city's, not merely the board's," Rutledge wrote in her opinion. "In my view, it follows that there can be no unconstitutional lending of credit in connection with the proposed consolidation, because it will not involve the city's assumption or guaranty of another party's obligation."
Attorney general opinions aren't binding; only judges can settle legal questions or disputes. But the attorney general's office gives guidance on questions from throughout the state.
The firemen's fund closed to new members in 1983 when the city switched to LOPFI for its current firefighters. Board members have gradually increased the benefits from half of a firefighter's ending salary to 90 percent, despite protests from the mayor and city clerk, who are on the board.
The fund's been in trouble for years, with actuarial estimates in 2015 giving it less than a decade of solvency. It took in about $1.1 million in revenue and investment income last year and paid out more than $1.4 million, according to city data. The fund held about $3.6 million in assets at the end of 2015.
The old police pension fund is in similar shape, but is generally expected to last a few years longer without some intervention.
Council members were torn when the issue came up last fall, saying the city's obligated to cover its promise to former firefighters but criticizing the board's handling of the fund.
Williams said Thursday afternoon he hadn't been able to take a close look at Rutledge's opinion and couldn't give a detailed response. But he said he generally disagreed with its main argument. No state law says the city's obligated to cover the fund if it runs out, he said.
State statute does say pension boards can curtail payments if their funds reach zero, but the previous attorney general, Dustin McDaniel, said in an opinion the board's ability to do so is limited. Williams disagreed with the attorney general then, too.
"I'm going to try to take the safe route, the safest route for our taxpayers," Williams said after the pension board's quarterly meeting. The attorney general could be wrong, he added. If she is, "The attorney general ain't gonna pay us" when the city's on the hook because of it, Williams said with a laugh.
Pete Reagan, a board member and fund beneficiary, said he agreed with the opinion. The city should have taken care of the issue last year, when investments in the stock market were doing better, he said.
"I knew it all along," Reagan added of the opinion, "but yes, it's a great vindication."
NW News on 01/29/2016