The Joplin Globe, Joplin, MO

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September 11, 2012

City manager proposes $1 million boost to pension fund

JOPLIN, Mo. — Joplin’s city manager proposes to give the city’s ailing pension fund for public safety employees a $1 million shot in the arm.

Like many public pensions across the nation, Joplin’s funding ratio — the amount of money available to pay benefits owed over time — is suffering, though Joplin’s is not as bad as some. The city’s current ratio is 53 percent, meaning that it could pay out 53 percent of the benefits it owes if all its members were eligible at once. The ratio also is influenced by investment swings.

“That’s one thing that is getting a lot of cities in trouble,” City Manager Mark Rohr said of the declining ratio. He said the $1 million contribution is an appropriation intended to boost the fund enough to keep it from becoming a crisis.

In addition to the proposed special allocation, the city will pay an annual contribution recommended by the fund’s actuary that is equal to 31.4 percent of the amount the city pays out in public safety payroll.

“We believe it’s the highest rate we’ve ever paid and with the city’s extra contribution the rate will start going back down,” said Leslie Jones, the city finance director.

City Council approval of the proposed special allocation and annual contribution rate will be required after the council examines the city budget proposal for next fiscal year later this month.

The pension fund’s balance is about $27 million now, up from as low as $18.5 million in 2005 when the city was not paying the actuary recommended funding ratio each year. The Joplin Police and Firemen’s Pension board hired an attorney and threatened a lawsuit if the contributions weren’t increased.

The reason so many public pensions are having trouble is because “in 2000, everybody gave a retroactive benefit that nobody paid for,” Jones said, referring to a change made in plans to allow retirements after 20 years. Until that time, “the plans were pretty well funded. You see cities filing bankruptcy about this right now.”

Residents in Springfield, for instance, approved a three-quarter-cent sales tax in 2009 to bail out it’s failing public safety pension. Public safety employees are not covered by Social Security. Other municipal employees are covered by a state pension.

In response to complaints about cities not meeting the actuary recommended contributions, the state Legislature enacted a law that allows the state to take city revenues in order to make up the difference when funding ratios fall low.

Additionally, the Government Accounting Standards Board is enacting new rules on how the shortfall in pension funds are shown on government financial reports.

“Those changes are for the city’s books,” said Jones. “The unfunded liability is a footnote now,” in financial statements. “With the changes, you have to bring liabilities on the books.” Showing that as a debt can affect a government’s credit rating. “It could really affect certain cities,” and those that owe more than their assets could be forced into bankruptcy.

Rohr said Joplin’s situation is not that dire. He said the new GASB standards are intended to make governments more accountable and their pension obligations more transparent than they were as a footnote.

The city enacted measures in 2009 to improve the funding ratio. Members of the plan adopted changes to the plan’s benefits for new employees. In exchange, the city infused the plan with a lump-sum $950,000 contribution as well as increasing the annual contribution rate from 17 to 20 percent and agreeing to begin paying the actuary’s recommended rate in subsequent years.

It later was learned that the $950,000 infusion was borrowed from excess funds in the half-cent public safety sales tax fund, designated for expansion and hiring increased workers in the police and fire departments and other safety measures. Rohr pledged then to begin to repay the loan in about 2018 when there was more money available in the pension fund as a result of the changes made to the plan and increased contributions and investment gains.

Asked about the status of the repayment plan, Rohr said, “We haven’t forgotten about that. The changes were made and it will take awhile for those to take hold,” he said, “but we haven’t lost sight of that. We found ourselves in the hole on the plan and we can’t recover from that overnight. But we track that (loan). We think it will be fixed over time.”

In addition to the funding issue, the pension board faces a lawsuit filed by disabled firefighter Tom Robertson regarding how disability pay is calculated. Jasper County Judge David Mouton has been asked to rule on the issue based on facts and arguments submitted by the two sides on July 6. The judge took the case under advisement.

Board meeting

A special meeting of the pension board is set for Thursday to hear proposals from five actuarial consultants that are candidates for handling the plan the next five years. The current contract with Aon Hewitt of St. Louis expires in November.

 

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