Springfield City Council has approved the budget for the fiscal year beginning July 1, 2008. Cuts of about 7% in the budgets of most departments will allow the City to contribute an extra $5,200,000 to the Police and Fire Pension Plan in the 2008-2009 Fiscal Year. This additional contribution is required by a new state law which mandates that pension contributions must meet the fully required amount at least once every five years. The following table shows the contributions that the City of Springfield has made over the last four years:
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| Covered | Actuarial | Employer | Net Pension | Accumulated |
| Year Ending | Payroll | Requirement | Contribution | Obligation | Obligation |
|
|
|
|
|
|
|
| 06/30/2005 | 23,866,000 | 7,318,828 | 6,795,690 | 523,138 | 523,138 |
| Actual |
| 30.67% | 28.47% |
|
|
| 06/30/2006 | 23,747,000 | 9,850,865 | 6,831,133 | 3,019,732 | 3,542,870 |
| Actual |
| 41.48% | 28.77% |
|
|
| 06/30/2007 | 23,864,000 | 10,345,517 | 7,388,016 | 2,957,501 | 6,500,371 |
| Actual |
| 43.35% | 30.96% |
|
|
| 06/30/2008 | 23,500,000 | 10,751,250 | 7,775,050 | 2,976,200 | 9,476,571 |
| Projected |
| 45.75% | 33.09% |
|
|
As of June 30, 2008, the City of Springfield will have failed to pay $ 9.5 million in required contributions over the last four years, and is faced with having the State of Missouri withhold a portion of its sales tax remittances if the full contribution is not made during the fiscal year beginning July 1st. (The extra $5,200,000 does not cover the total amount of short payments over the last 4 years.)
The retirement benefits that are paid (currently about $15,000,000 per year) come from:
1) Police and Fire Employee Contributions (11% of payroll)
2) City of Springfield (Employer) Contributions (29% of payroll)
3) Investment Income (interest, dividends, capital gains)
4) Liquidation of pension fund assets (if required)
Last year, employee and employer contributions were about $10,000,000 and investment income was about $14,000,000. (The Net Assets of the Plan increased about $9,000,000 in the year ended 06/30/2007.) However, the investment results this year are very poor and may actually result in a net loss for the year and require that assets be liquidated to meet benefit payments.
The obvious fact is that the current budget cuts and extra contribution are only half a band-aid on a much more serious problem. The Police and Fire Pension Plan has a liability of about $280,000,000 for retirement benefits and assets of less than $140,000,000. The funded ratio of the plan as of 06/30/2008 will be less than 50%. The result of this shortage in the Net Assets is that Investment Income is being lost every year that should be available to pay benefits and reduce the required contributions of both the employer (City of Springfield – citizen/taxpayers) and the employees (policemen and firemen).
How much Investment Income is being lost by City Council’s lack of action? Lets do the math.
Under Funded Amount $ 130,000,000
Assumed Rate of Return 7.5%
Earnings Lost: Per Year $ 9,750,000
This $9,750,000 could be better used to hire the additional police and fire employees that were cut from the current budget, and reduce or sunset the Capital Improvement (¼%) or Parks Sales Tax (¼%). The effect of this would be to allow the citizens of Springfield to make the choice where their money will be spent.
Since next year’s budget was passed, the under funded status has cost the citizen/taxpayers of Springfield over $750,000 and this amount increases every day that this problem is allowed to exist.
Contact City Council and let them know that the citizen/taxpayers of Springfield demand leadership and a solution to this problem NOW! Don’t wait another second.
Fred B. Ellison
Missouri Liberty Coalition
1315 N. Broadway Avenue
Springfield, MO 65802
P.S. - Please note that this is not an anonymous character assassination, just the facts.
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