Our local government agencies have some tough decisions to make.
The financial crisis has blown a hole in the rosy forecasts of pension funds that cover teachers, police officers and other government employees, casting into doubt as never before whether these public systems will be able to keep their promises to future generations of retirees.
The upheaval on Wall Street has deluged public pension systems with losses that government officials and consultants increasingly say are insurmountable unless pension managers fundamentally rethink how they pay out benefits or make money or both.
Note: This math was reviewed in September 2009 with Joe Christoffel from Nevada County and it only includes the MISC Employee Pension plan (it does not include the Public Safety Employee Pension plan).
Go to page 5 of the Actuarial Valuation (as of June 30, 2007) for the
Miscellaneous Plan of the County of Nevada (employer #505)Download NOV_08_NEV_CO_PERS_UL.
Find the Entry Age Normal Accrued Liability figure on page 5- $248,063,046. Next find the June 30 2007 Market Value of Assets as of $228,852,611 on page 5. Now
adjust the Market Value of Assets DOWN by the amount of reported losses
to the CalPERS investment portfolio from June 2007 through June 2009
(HERE-page 3). In 2008 the losses were 4.9% and in 2009 (through June 30) the
losses were an additional 23.4%. Total losses from 2007 through 2009
were 28.3%. Adjust the 2007 MVA down by 28.3% to get a current
estimated MVA of $164,137,323.
The amount of promised
benefits are $248,063,046 minus the amount available to fulfill the promises of $164,137,323 creates an unfunded liability of $83,925,723.
use the MVA in the calculation because CalPERS states,"..the funded
ratio based on the Market Value of Assets is a better indicator of the
solvency of the plan."
Math: Entry Age Normal Accrued Liability of $248,063,046 minus Market Value of Assets (estimated June 20 2009) $164,137,323 equals the unfunded amount of $83,925,723.
The goal of the exercise was to estimate how badly the recent stock, bond, real estate crash hurt the County's pension plan. It should be noted that the $83,925,723 does NOT include CalPERS' admin fee. Net of the CalPERS 1% annual admin fee the UL jumps to $88,552,776.
I was recently asked to provide a template to help concerned tax payers calculate their community's unfunded liabilities. Download MY_UNFUNDED_LIABILITY_2009 is the template I created to help tax payers across the nation attain their community's UL number.
The California Foundation for Fiscal Responsibility (CFFR) has been a tireless leader for tax payer funded pension plan reform. The CFFR has a clear and concise initiative (HERE) that addresses the current pension plan crisis plaguing California's public agencies.
SESF has been asked to speak on behalf of Nevada County taxpayers at 10:00 am October 27th regarding Nevada County's ballooning unfunded pension plan. It is estimated that the Nevada County pension plan for Misc employees is underfunded by over $80,000,000.00. SESF was asked by the Nevada County Tea Party Patriots* to highlight Nevada County's unfunded liability crisis and offer possible solutions.