Minnesota counties feel burden of pension increases

Published 10:31 am Monday, July 15, 2013

ST. PAUL — Cities and counties across Minnesota are feeling the pinch as they try to cover mandated increases in public pension funds.

The rise in pension costs has played a role in cities’ decisions to cut staff, reduce services or even raise property taxes. Some public employees are covering more of the pension costs themselves.

“These are real burdens,” said Mark Haveman, executive director of the Minnesota Center for Fiscal Excellence. “There is a crowding out of services that is going to continue into the future.”

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Staffing costs, including salaries and benefits, are local governments’ biggest expenses. While many municipalities can find ways to reduce costs of health care or other benefits, pension costs are out of their control: The contribution rate is set by the Legislature, and local governments must pay.

The Legislature has approved several rate hikes for the two primary plans under the Public Employees Retirement Association that have led to incremental increases in one or both plans during the past 12 years. In May, the Legislature approved another pension package with rate hikes in the police and fire fund in 2014 and 2015.