The municipal debt crisis that long term unfunded liabilities for retired employee benefits accumulate and become impractical to fund. For years the problem has been pushed under the rug and left for future administrations to address. This failure to react has spiraled to a crisis that has to be addressed now.
A proposed solution for addressing long term liabilities for administrative municipal employees is to take them off the municipal payroll and arrange to contract them through a private firm. This approach has the following benefits:
* A private firm is free of political considerations and can better react to business and economic conditions, thereby creating efficiency in handling employee benefit costs and salaries.
* The private firm is assuming liabilities of employment from the municipality.
* A private human resource firm is specialized in handling employee benefits and administration. This specialization enables them to better skilled and positioned to deal with the problems specific to employee administration, freeing the municipality to do what they do best…serving the public.
* Moving their employees to a private firm allows an opportunity to stop providing long term unfunded benefits.
* While off loading human resource administration and employment to the outsourced human resource company, the municipality still retains operational control over the employee.
This proposed solution gives the municipality a way out while minimizing political fallout.
Curtis G. Tuck, II, Financial Analyst and President, CDS, Inc.