A 2012 actuarial report states the city of Jackson has an unfunded liability of $61,685,944 in its municipal retirement account. The unfunded liability increased $1.2 million from the 2011 report. The retirement account covers police and firefighters hired by the city prior to April 1, 1976. The funding level is currently 51.6%.
Retirement systems for policeman and firemen were managed by municipalities for decades. Enrollment in these retirement accounts ended in the late 1970's as new employees were enrolled in PERS. The municipalities were given the option of converting these accounts to the PERS system in the 1980s but nearly 20 chose not to do so. The municipalities, not PERS, are responsible for these accounts although they are managed by PERS. 2011 post on this issue.
The report states there are only two current city employees enrolled in the system and 654 beneficiaries- 453 retired employees and 191 surviving family members. 10 are on disability. The annual benefit to a retiree is $22,328 and $14,662 to a survivor. The total payment in fiscal year 2011 to beneficiaries was $13,050,754. The average age is 72 years old. A member is paid 50% of his average compensation and an additional 1.7% of average compensation for each year of service over twenty years (the maximum level is 66%.).
The total liability for Jackson is $127,472,064 but the plan has $65,786,120 in assets. The plan assumes a rate of return of 8.0% BUT the report does not state the actual rate of return. The plan was funded on September 30, 2011 at a level of 51.6%.
Councilmen Frank Bluntson, Tony Yarber, and Quentin Whiwell all told this correspondent the city did not tell them about this account nor did it notify them of the unfunded liability. Mr. Whitwell said he spoke to PERS and was told the plan as in no danger of failing to meet its obligations. Information regarding the plan starts on page 73 in the Jackson comprehensive financial report.
Jackson faced a similar problem in the mid 1990s. Jackson's plan was below a funding level of 50% from 1991 (38%) to 1996 (46%). The unfunded actuarial liability was $73,861,000 in 1996 and after reaching $80,568,000 in 1994. Jackson issued $50 million in retirement bonds (actually $49.8 million) that were paid off in 2009. The interest cost was $23 million of the bonds. The average interest rate paid on the bonds was 6.3% (not a weighted average) and the average annual principal payment was $4.1 million. The proceeds gained from the sale of the bonds paid the unfunded liability down to $15.8 million in 1997 and improved the funding level to 88%. The plan had a surplus of $6.2 million in 2002 and was funded at 104%. Unfortunately, the funding level has declined since 2004:
1998: 90%
1999: 98%
2000: 102%
2001: 104%
2002: 94%
2003: 88%
2004: 83%
2005: 76%
2006: 73%
2007: 72%
2008: 70%
2009: 59%
2010: 54%
2011: 52%
Jackson dedicates 5.75 mills (slightly over $1 million per mill) to funding the plan. The funds generated by the property taxes were used to retire the bonds. Thus Jackson only contributed $280,482, 7.9% of the PERS-required contribution of $3,563,516. However, Jackson paid more than the required amount in 2010: $5,735,113 while PERS required $5,005,779 - a payment of 114%. Jackson is scheduled to end contributions in 2020 as it projects the system to be fully funded as it winds down to zero beneficiaries.
Some facts from the reports:
1997
Assets: $120.4 million
Liabilities: $137.5 million
Unfunded liability: $17.1 million
Average monthly benefit: $2,034
2004
Assets: $119.7 million
Liabilities: $144.6 million
Unfunded liability: $24.8 million
Average monthly benefit: $2,543
2009
Assets: $79.1 million
Liabilities: $133.2 million
Unfunded liability: $54.0 million
2010
Assets: $70.8 million
Liabilities: $131.2 million
Unfunded liability: $60.4 million
2011 PERS report on all municipal retirement systems
2010 PERS report on Municipal Retirement Accounts
2010 PERS report on Jackson's Municipal Retirement Account
2009 PERS report on Municipal Retirement Accounts
2004 PERS report on Municipal Retirement Accounts
1997 PERS report on Jackson's Municipal Retirement Accounts
1997 Jackson Special Obligation Bonds
4 comments:
Even worse than the state and the state is horrific.
Easy solution....
1. raise taxes
2. lower benefits
3. combination of 1 & 2
4. continue to ignore
It depends on how much Jackson continues to contribute to the plan. The numbers actually work assuming a 5% rate of return on investments and a continued contribution of $5.2 million every year through 2020.
The problem is Jackson hasn't been fiscally responsible in the past and is having to play catchup on the contributions that should have been made years ago. It will be very easy for the council to skip a few payments during hard economic times and push the full funding date back even more.
Not disagreeing with you one bit. The problem is
1. The plan is barely 50% funded.
2. No one outside of a few people in the administration knows about it.
3. The reports do not state what the rate of return is. MPACT and PERS both enjoyed double digit returns for the last two years. What is this one? Don't know. Question worth asking.
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