Huge Unfunded Liability Revealed at Nashville Budget Meeting Hosted by City Council Member Bob Mendes: Retiree Healthcare Benefits


Wednesday morning on The Tennessee Star Report with Michael Patrick Leahy – broadcast live from Music Row on Nashville’s Talk Radio 98.3 and 1510 WLAC weekdays from 5:00 a.m. to 8:00 a.m. – Leahy was joined in studio by the all-star panelist Crom Carmichael.

During the last segment, Carmichael described this past Monday night meeting he attended which was held by Metro Council Member Bob Mendes where people discussed Nashville’s budget. Ironically, Carmichael was the only guest to ask about retirees while other guests focused their attention on throwing more money towards a broken educational system. Here is his account.

Leahy: We are joined in studio by our good friend and all-star panelist Crom Carmichael. Crom, because you are so good-hearted and you do so many things for the public good. You are out there doing important work that not that many others were doing.

You went to a meeting on Monday. The budget meeting that Metro Council Member at Large Bob Mendes held. Tell us about that meeting.

Carmichael: Councilman at Large Mendes held a meeting at a church on Granny White Pike. I’m going to say there were probably somewhere between 50 and 70 people in attendance. Something like that.

And Councilman Mendes kind of laid out in a fairly general sense some of the issues in regard to the budget. Tax rates and Metro versus other cities and things like that. And then he had opened the floor for questions. And most of the questions had to do with education.

Leahy: I’m guessing Crom Carmichael may have asked a question?

Carmichael: Well I did. But what was fascinating was this. The question that I asked was, do you know what our situation is with unfunded liabilities in the city? And I asked, in particular, unfunded liabilities in regard to healthcare that has been promised to retirees.

And Councilman Mendes knew a great deal about it which was terrific. He said it is the biggest fiscal problem that we have as a city on the spending side. Here’s what he said, he said we have two promises that we make to retirees. One is a pension and the other one is healthcare. Our pensions are 96% funded.

Leahy: Well that’s good.

Carmichael: Yeah. Which for our listening audience, what that means is, that if we stopped all promises going forward for our future retirees we have 96% of the funds needed to keep the promises that we have already made. So that’s good. But, he went on to say that when the healthcare benefits for retirees was passed there was no fund set up.

Leahy: What?! No money set aside?

Carmichael: No money set aside. And it is similar to a pension in the sense that it is a promise made for future expenditures which typically you would set money aside. In fact, I would say that most businesses that make such a promise and don’t set money aside, their auditors would not approve their financial statements.

And if they continued to do it, the executive might actually be put in prison for fraud, OK? I don’t know that to be true but I suspect it to be true when you make a promise and then you can’t keep it.

Leahy: When you make a financial promise.

Carmichael: That’s right. A financial promise. And so he went on to say, that the amount we currently spend, the total Metro budget is about $2 billion. That’s with a B. We spend about $70 million now and that’s three and a half percent of the budget on healthcare benefits to retirees.

Leahy: And that comes out of the operating budget?

Carmichael: That comes out of the operating budget and it’s growing every year. And he said, the total unfunded liability on the books, $4 billion.

Leahy: Wait. The total budget every year is only two billion for everything.

Carmichael: Yeah.

Leahy: And the underfunded liability…

Carmichael: On healthcare.

Leahy: Healthcare for retirees is four billion? This is kind of like an upside-down balance sheet.

Carmicheal: It’s terrible. And all this stuff about property tax increases. And if they don’t make the proper adjustments, and they can be one of two things: they can either renegotiate to some extent the promises that had been made, and they can stair step that.

For people who are in retirement now, perhaps you don’t make a change because you made a promise. But if you’re going to retire in 10 years than the promise might be less. If you’re going to retire in 20 years than the promise might be less still.

And so on and so forth. But for brand new retirees, the promise needs to be dramatically changed, or we need to fund it. You need to do one or the other.

Leahy: But Crom, I mean you negotiate it down and stair-step it but it’s still going to be a lot.

Carmichael: I understand. If you don’t address it and just say, well it’s too big of a problem. Even the people in the audience there seemed to be no interest by the people in the audience over this issue. Nobody said a word.

They said, well we need to spend more money on education. Throwing more money at a failed system isn’t going to improve the system if you don’t change the system. That’s like saying I’m going to pay a  basketball coach who doesn’t win a game that if I  double his pay he’ll do better.

Leahy: He’ll do better. (Chuckles)

Carmichael: There is something else wrong with our educational system, and it isn’t money.

Leahy: Obviously, there are a number of issues we could talk about.

Carmichael: This budget issue, and I would encourage The Tennessee Star Report to regularly contact each member of the council and find out what they are going to do about it. And by the way, this is something you can check on. Find out whether or not council members once they are retired, will they get a great healthcare package. Find that out.

Leahy: Yeah. We’ll have to look into that. It’s a funny approach towards money that you see often in Democratic-run cities. They don’t really have financial responsibility. They don’t set aside money for these kinds of things.

Carmichael: They pass it on. They make a promise to people who support them politically and then burden the taxpayers. And this is something every media outlet in this city ought to be all over this until it gets resolved.

If they do news on the city budget this ought to be part of it and it ought to be a dereliction of duty every time they do a report until its resolved.

Leahy: I want to talk about this some more. I want to know, who made this promise? When? And why?

Carmichael: I don’t know. It wasn’t Bob Mendes. This was done quite some time ago. But it still needs to be addressed by the Bob Mendeses who are on the council today.

Listen to the second hour here:

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Tune in weekdays from 5:00 – 8:00 a.m. to the Tennessee Star Report with Michael Patrick Leahy on Talk Radio 98.3 FM WLAC 1510. Listen online at iHeart Radio.
Photo “Bob Mendes” by Bob Mendes. Background Photo “Metro Council Meeting Room” by Metro Council. 






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One Thought to “Huge Unfunded Liability Revealed at Nashville Budget Meeting Hosted by City Council Member Bob Mendes: Retiree Healthcare Benefits”

  1. Hugh Morris

    This is critically important information that would never, ever be addressed anywhere except a forum such as the Tennessee Star. Thank you both for raising this issue. Michael you, and your all star panelists, make the ride into work worth it. Some days I go slow just to hear a bit more of the show!