I am addressing a recent letter to the editor regarding the police and fire pensions. It was stated in this letter that the unfunded liability of police and fire pensions has increased from $39 million to $81 million over the past 14 years.
The figures our citizen used in comparing are the unfunded liability figures from the state’s Department of Insurance Actuarial Valuation reports for each fund for April 30, 2004, and May 1, 2018. Please note, these figures do not agree to the figures reported in our audited financial statements.
The state valuation is done on a different method of the actuarial valuation, one that is not compliant with the Governmental Accounting Standards Board (GASB), and, therefore, not used in our financial statements. The combined unfuded liability from our audited financial statements for April 30, 2018, was $63,156,747. This actuarial calculation is provided by an independent study done on each fund, using methods compliant with GASB.
During these 14 years, many things have changed, a lot of which are determined at the state level and out of our control. One item that has changed — and changed the liability calculation substantially — was the change in mortality tables used in the liability calculation.
This 14-year period included the recession of 2008/2009 which dramatically decreased investment returns, thus having a large impact on asset balances and, in turn, liability balances. I don’t believe the pension crisis was ever blamed in totality on any one person or even multiple people.
The problem has been discussed in that administrations of the past did not fund the actuarial determined minimum contributions needed for the plan each year. Each year, our independent actuary (and the state based on their assumptions and methods of calculation) comes up with a contribution figure needed to fund the plans to statutorily determined standards.
Under this administration, the city has funded the pension plans to the actuarial determined contribution amounts — sometimes more. Administrations of the past did not fund to the actuarially determined amount, sometimes only funding 60-70 percent of the required contribution, which has compounded the problem over the years.
Would we be 100 percent funded if they had made required contributions? No. Too many factors out of our control exist. Until the pension funds are fundamentally changed at the state level, the liability will continue to grow, even as we make 100 percent+ of the required contributions.
I continue to advocate on this issue statewide, striving to develop a sustainable path for all pension funds that would also include positive reforms and better investment opportunities.
Mayor of Belleville