Archive for the ‘Pension’ Category
November 4, 2013
This is an issue that the City of Memphis is trying to sneak by the voters in a vote that will probably have a low turnout. These are the reasons to vote NO. Early voting starts today. As they say in Chicago, vote early and often.
- The Commercial Appeal writes that 63% ($30 million) goes to Pre-K and the rest (1$17 million) to property tax reduction. However look at the wording of the Ordinance which states that the money goes to a Pre-K Commission appointed by Mayor Wharton which will make the decisions. Do you trust such a commission?
- Our sales tax is already very high (9.25%) and this would take it to 9.75%, the highest in the state, a very regressive tax.
- There is no evidence that Pre-K works and has any long term benefits,.
- There should be no new taxes until the City of Memphis and the City Council reform pensions and health care costs and get on a path to reduce unfunded liability as pointed out by the State of Tennessee.
October 3, 2013
The Unfunded Liability of the United States
Is the shutdown of government a bad thing? What has happened is that 800,000 nonessential employees have been furloughed. Federal agencies have the power to designate their employees’ status in the event of a government shutdown. The last time Congress and President Obama stalemated, in 2011, the administration estimated that 800,000 of the 2.1 million employees in the federal workforce would be furloughed. Now that the there is a stalemate, we will see how it works. If we can get along without the 800,000 nonessential employees it will give us some indication of how much fat and waste there is in government. I have no doubt that these nonessential employees will be rehired and paid but it is a great demonstration of how much is our government overweight.
We have had one federal program after another and each has cost more than the government projected. Starting with social security, then the war on poverty, then medicare, medicaid, food stamps and now Obamacare. Here is the headline from the CA just yesterday. “Shelby County expects big bill to comply with Affordable Care Act”.
We have to face up to the unfunded liability of the federal government as well as our local government. We have not had a federal (more…)
September 26, 2013
As I read through this massive document I want to point out some of the good suggestions from the ridiculous ones. I have attached a section entitled “Implement Strategies to Lower Volatility of Pension ARC”
The Pension ARC is the annual required contribution necessary to fully fund the promised pensions. For the plan year ended June 30, 2012 this figure was $89 million dollars. WOW!! The City of Memphis put in 22.6% of this. The difference in the ARC and what the City actually contributed of course adds to the unfunded liability plus the interest on the difference.
The suggestions from the plan are as follows.
- Freeze cost of living (COLA) adjustments until the plan achieves 90% funded status.
- Contribute the full ARC each year. Where is the Money ($69 million) coming from?
- Close the current defined benefit pension plan and begin a defined contribution plan.
- Extend the City’s 2011 pension reforms to non-vested employees. Extending the 2011 reforms to all non-vested employees (47.7% of total employees) would reduce the ARC by $5 million in 2014 and by $28.2 million from 2014 through 2018.
Read through the report and let me know if you think any of this is really going to happen. The answers are there to make real reforms (more…)
September 19, 2013
For three days running there have been lead articles in the CA about our City of Memphis pension unfunded liability.
Finally yesterday, they mentioned the even greater OPEB unfunded liability (cost of health care for retirees).
I have attached the report from PWC consultants for your review. Read it at your leisure but here are some highlights.
- Despite better than average asset returns for 2010 and 2011, the plan’s funded status will continue to deteriorate, from $682 million to $740 million.
- Assuming no other changes, it is estimated that it would require an annual asset return of 13% over each of the next 10 years in order to fully fund the plan.
- Conclusion: Based upon the actuarial assumptions used to determine the plan’s liability and ARC, a projection of a workforce similar in size to the current one, and the current funding policy of 6.0% of compensation, the plan is not sustainable in the long-term.
September 12, 2013
As I start reading through this massive document I have to start with the introduction and rationale of the plan. Here are the first 26 pages of the draft plan.
To be a successful urban area, Memphis has to do the following.
- Increase property values
- Decrease poverty
- Ensure government efficiency
- Improve neighborhoods
- Invest in human capital
- Grow the economy
Wow!! What great ideas. Why did I not think of those?
September 5, 2013
I have been reviewing the various parts of the Shelby County Efficiency Report and it has been very interesting and informative. The PFM group has identified a number of areas with a great potential for savings such as health care premiums, OPEB, sick leave carryover and paid time off excesses. All of these are legitimate areas of great savings and the only thing standing in the way is getting seven votes from the County Commission.
Here is another one that makes sense and one that really gets at the heart of the problem with the County Commission and the City Council. Most of these politicians see City and County government as a source of jobs for their constituents. Their first instinct is to (more…)
September 4, 2013
At the last meeting of the City Council (August 20, 2013) they passed the smart meter resolution. There was also on the agenda an item for a resolution to approve the 2014 Street Lighting Schedule of Fees. This item was delayed until sometime in September.
Let me get this straight. This is an expense that is covered by the services paid for by property taxes. Now the City Council wants to take it out of their expense budget and bill it directly to the taxpayers through the MLGW billing process. If you will look on the back of your MLGW bill you will see that you are already being billed directly for the following.
- Sewer Fee (Memphis)
- Solid Waste Fee (Memphis)
- Storm Water Fee (Memphis)
- Mosquito/Rodent Control Fee (Shelby County)
Now they want to put a street lighting fee on your bill directly instead of raising your property taxes.
August 26, 2013
Continuing my review of the Shelby County efficiency report provided by the PFM group, retiree health care costs known as OPEB (other post employment benefits) gives a great contrast between the City and the County. Consider these facts.
The unfunded liability currently reported is as follows.
Shelby County: $232 million
City of Memphis: $1.25 billion
MLGW $420 million
Memphis School System $1.16 billion
Clearly there is a problem with all these systems but the county is in much better shape than all the rest.
Shelby County funds retiree medical and life insurance benefits as well as long-term disability benefits (collectively, known as Other Post-Employment Benefits, or OPEB) for retired County employees. In FY2012, Shelby County contributed approximately $31.9 million to its OPEB trust, with the vast majority of that sum contributed toward retiree health insurance.
Nationally, many state and local governments have delayed pre-funding their OPEB expenses and have too little (or no) money set (more…)
August 20, 2013
Several interesting things are on the City Council Agenda today.
- The smart meter item is up for voting at a cost of $10.15 million.
- There is a proposal for time of use residential rate schedule for those customers choosing smart meters.
- There is a new charge to be on your MLGW bill for street lighting at a residential charge of $51.84 per year, an apartment charge of $12.96 per year and a commercial business charge of $103.80 per year. This is a backdoor tax increase.
- A resolution to accept funding for Memphis Public Library from Humanities TN for the public program Bridging Cultures: Muslim Contribution to the US Since 1776.
I previously made a comment about smart meters and was squarely in the middle of the two sides. One of my readers said that my comments were similar to the famous Whiskey speech by Judge Soggy Sweat. I plead guilty to listening to both sides of the debate and each side has a point. I think it should be approved but without time of use rates. It should be defeated if time of use rates are also approved.
July 25, 2013
Here is stunning proof of the fiscal irresponsibility of the City of Memphis government versus Shelby County government.
Unfunded liability is a promise made by one party (the City of Memphis) to another to pay for most of another’s health care expenses (retirees). There is no legal obligation for this promise , it is just a promise. Well in 2007 the government came along and said that this promise called OPEB (Other Post Employment Benefits) needed to be put onto the books of the City and the County. In other words, the government wanted the public to see the books and how well the City and the County were keeping their promises.
You have to understand that the actuaries know that this OPEB obligation grows each year with more people on retirement and people living longer. Therefore the amount of money set aside each year into the OPEB fund needs to cover the future promised benefits. Anything less than the amount the actuaries say is needed is a loan for the future and has the effect of adding to the unfunded liability.
Now here is the proof of the irresponsibility of the City of Memphis versus Shelby County.