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League of Minnesota Cities <br />183 University Ave. East <br />St. Paul, MN 55101.2526 <br />(612)227.5600(FAX:221.0986) <br />December 30, 1987 <br />To: Managers, Administrators and Clerks <br />From: Stan Peskar, General Counsel <br />Subject: EXCESS 2% POLICE AID -USE LOCALLY <br />Since 1977, cities and counties have been required to rebate amounts <br />received as police pension aid over and above city or county <br />requirements to fund employer contributions for police pensions, to <br />the PERA police and fire fund. This is done without crediting th-. <br />local government or the employee for these amounts against future <br />pension contribution requirements. <br />The league opposed the 1976 restriction on the use of these aid funds <br />at that time and in subsequent years, however, at those times only <br />`. small amounts of money were involved and the PERA police and fire <br />fund arguably needed the extra infusion of money. In addition, <br />cities were in fairly stable financial condition during most of those <br />years. Now all three of those conditions have changed. <br />In 1987, PERA has billed cities and counties for $1,649,958.88 in <br />"excess" aid. This happened because automobile insurance rates on <br />which the 2% tax is collected have increased far faster than police <br />salaries on which the pension contribution is figured. As inflation <br />in autn insurance costs continues to outpace wage costs, more and <br />more cities will face uncredited transfers to PER&, unless the law is <br />changed. <br />If the PERA police and fire fund ever had a need for these funds, that <br />need no longer exists. According to the PERA staff that fund is now <br />more than 100% funded and the current rate of employer and employee <br />contributions is in excess of the funds needs. <br />Finally, cities now face a financial squeeze unparalleled since the <br />local government aid suspensions of 1982. <br />It appears to be a good legislative year for cities and counties to <br />put on a full court press on this problem. <br />If your city is one of those required to send back part of the 2% <br />police aid or may need to in future years, you or another <br />representative from your city may should talk to your legislators <br />