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County will need $8.8M for pensions


February 19. 2013 9:33PM
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Luzerne County taxpayers must come up with a projected $8.8 million next year to keep the county employee pension fund stable, officials say.


County officials have said they won't be able to pay another $7.7 million subsidy owed this year on time because of an inherited payment delay.


County Retirement Coordinator Rick Hummer said the actuary also expects future taxpayer contributions to hover around $8 million annually.


It should be close to that the next few years unless there's a dramatic change in the market, Hummer said.


Shoring up is necessary to close a shortfall that started developing years ago, officials have said.


The fund relies on investment earnings and employee contributions to cover present and future obligations. Taxpayers must pick up the slack when revenue falls short because the pensions are guaranteed by law.


The gap between fund assets and future liabilities was projected at around $50.7 million in 2010.


Hummer said the fund deficit was whittled down to $37.7 million as of the end of 2011, and he has not received more recent projections.


Pension subsidies have become the county norm since 2002, when the first contribution in more than a decade -- $313,000 -- was prescribed by the pension fund actuary.


The subsidy increased to $5.4 million in 2003 and hovered around that amount until 2007, when it dropped to $3.9 million. It stayed about the same -- $3.4 million -- in 2008 before rising to $8.4 million in 2009 and $9 million in 2010.


State funding covers a portion of this cost in some offices, such as human service branches and 911.


Most of last year's $7.1 million subsidy was pushed off to this year because the county ran out of money, and the $7.7 million 2012 contribution isn't expected to be paid on time either.


County Manager Robert Lawton has said he does not know when the county will be financially equipped to pay its annual pension fund subsidy in the year it is due because it will take time to correct an inherited payment delay.


Lawton could not be reach for comment on Monday on how much of this year's subsidy is still owed and whether the rest from 2011 has been paid.


The fund misses out on potential investment earnings when the money arrives late, officials say.


Council Chairman Tim McGinley, a member of the retirement board overseeing the fund, said county workforce reductions have lowered employee contributions into the fund. More employees also are choosing to take reduced pensions earlier, he said.


There are two factors working against the fund – fewer contributing and more starting to retire, he said.


The fund spent about $15.5 million in 2011 on pensions to roughly 1,100 retirees, Hummer said.


Another 190 former employees are eligible to receive pensions in the future, and 1,652 employees were paying into the system as of Jan. 1, he said.


County officials have praised fund advisor Morgan Stanley Smith Barney for recommending investments to rebuild the fund, which was valued at $203.5 million as of the end of November. The fund was worth $151 million when the company took over as advisor in September 2008.


But they have a lot to overcome. There was a big deficit to start with, McGinley said.


County seeking options to deal with cash shortage

Luzerne County Controller Walter Griffith said he has obtained an opinion from the state that $1.4 million in 911 funds can't be borrowed to help with the county's cash-flow problem.


The administration had planned to ask council to vote tonight on the 911 borrowing because the county faces a $6 million cash shortfall this year, blamed primarily on delays receiving state reimbursement for the Children and Youth department.


Council Chairman Tim McGinley said he will ask the administration for an update on other options at tonight's meeting, which starts at 6 in the county's Emergency Management Agency building, Water Street, Wilkes-Barre.





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