EDITORIAL: D.C. Council Must Stand for Employees' Pension Fund
James Short, Special to The Informer | 1/7/2014, 8:30 a.m.
As a retired firefighter and a native Washingtonian, I have a lot at stake concerning our city's pension fund. Through tireless debate and decades of change, the District's pension system has emerged as one of the strongest and best funded in the country. Unfortunately, this success may be short-lived as the D.C. City Council recently proposed legislation that would require our city to divest from fossil fuel companies.
The District has a long, complicated history when it comes to its employees' pension fund. During the 1970s and '80s, D.C. neither invested employees' contributions to their retirement funds, nor made a matching contribution to the investment.
Instead, the pension funds were added to annual budgets and spent on city projects. As a result, by the early 1990s, D.C. had a looming financial crisis, like we've seen in so many other cities. Eventually, Congress stepped in and took responsibility for the pensions created through 1997, and D.C. created the D.C. Retirement Board to oversee the pension fund. The plan worked. To date, D.C. has no unfunded pension liabilities.
This fact is worth pausing on. In the course of two decades, our city went from a faulty, unsustainable pension system to one of the best systems in the country. A Pew Charitable Trust study found that 104 percent of D.C.'s pensions were funded. The same study found that only 52 percent of Chicago's pensions were funded — and also carried an $11.9 billion liability. And only 70 percent of New York was funded, with a $44.1 billion liability. Our retirement is the gold standard by which every other city in this nation.
Now, the D.C. Council has proposed a divestment act that would fundamentally change our city's investment policies by divesting in fossil fuels. Oil and natural gas companies are often the highest performing and most reliable investments, providing very healthy returns for teachers, firefighters, police officers and other public pension retirees. In fact, compared to other investments, fossil fuel companies average a seven times greater return. This fact alone is astounding and should demonstrate very clearly the lack of financial justification for — or even defensibility of — divestment.
Given the economic benefits of these investments, one may wonder at the reasoning behind enacting such change. And, truthfully, part of the reason this proposal has been rejected so often is because it provides no real benefits whatsoever to the community or to the environment. Contrary to what proponents would like you to believe, divesting in fossil fuel companies will neither change the spending habits of these companies nor change how the planet consumes energy.
We can all agree that we need to work together in combating climate change. But, this ill-conceived policy, which would do much more harm than good, is not the place to start. The debate surrounding this proposal should not be about global energy policy, but about our city's pension funds. The proposal enacts no real environmental change — all while undermining the economic future of our city.
It has taken a long time to mold D.C.'s enviable retirement system, and this proposal will be a step backwards. With our city's — and my own — economic future on the line, I urge our city council to separate fact from fiction and oppose this ideologically driven proposal.
James Short is a retired deputy fire chief with the D.C. Fire Department and a native Washingtonian.