Archive for Tuesday, August 16, 2016

City’s financial audit shows pension shortfall; need to assess fees

City Hall, 6 E. Sixth St.

City Hall, 6 E. Sixth St.

August 16, 2016

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A multimillion-dollar shortfall in state pensions owed to City of Lawrence employees could negatively affect the city’s long-term budget, should contribution rates increase in the future.

The $58.8 million shortfall in the Kansas Public Employees Retirement System for City of Lawrence employees is not controlled by the city, but potential plans to close gaps in the state’s pension fund have included raising the employer contribution rate. The city employs about 750 full-time employees, and such a rate increase would impact the city’s bottom line.

“If we have to contribute more, that has to come from somewhere, so we’d have to make some decisions,” said City Auditor Michael Eglinski.

The city has always had pension debt, but this is the first year that accounting rules required that financial audit reports include net pension liabilities. City commissioners at their meeting on Tuesday evening will be discussing the annual audit from Eglinski, who takes a look at various financial indicators for the city.

The report measures totals for 2015, and compares it to the last 10 years of data, as well as benchmarks for other cities comparable to Lawrence. Overall, Eglinski noted that the audit shows mixed results. The report found that the city’s financial position remains above area benchmarks in 5 of 11 categories that he measured.

Owing in part to the inclusion of pension debt, the city’s long-term debt burden rose sharply from 2014 to 2015, and is now above the benchmark set by other communities, the report found. However, since credit rating agencies already consider a city's pension liabilities, the change in reporting is not likely to affect the city’s bond rating. Instead, it’s just more information to inform budget decisions, Eglinski said.

“One of the reasons that they wanted to have that change in the accounting rules is to make organizations a little bit more aware of what the real costs were, and to make those costs a little more transparent,” he said.

Because KPERS is controlled by the state, Eglinski said the main means the city has of controlling how much it pays into the plan is its staffing levels.

“In the long term, we can be very aware of when we add an employee, it’s not just the pay, but there’s also these long-term benefits,” Eglinski said. “And we can make sure that we’re using that to make the decisions.”

The extent to which the city relies on fees to fund government services has been decreasing, with charges for services covering less of the city’s expenses than they did 10 years ago, according to the report. Eglinski said he first looked at the topic a few years ago and found that though the city has a policy to reevaluate fees on a regular basis, that wasn’t being done consistently.

“We would set fees, but then wouldn’t go back and revisit them,” Eglinski said. “So that a fee could be 10 or 15 years old, and we hadn’t gone back and said, ‘Should it be adjusted?’"

The actual cost of providing a service, though, is not the only determining factor. A key part of fee levels is policy-driven, and making sure activities — such as youth sports or entrance to aquatic centers — remain accessible, said Director of Finance Bryan Kidney. That is a decision made by the City Commission.

“One thing is what amount would it be or should it be, and then of course the more policy-driven is what amount would the Commission like it to be?” Kidney said. “If we charge people for some of our services for what it actually costs to provide those services, then no one would use those services… How much does the city feel that property or sales tax should cover a portion of that cost?”

Lawrence’s savings account took a dip, the report found. The city’s unassigned general fund balance declined slightly in 2015 and was at about the same level as it was in 2011. Lawrence’s general fund balance as a percent of expenditures is 20.6 percent, which is below the benchmark amount of about 23 percent.

City commissioners will review the financial performance audit at their meeting at 5:45 p.m. Tuesday at City Hall, 6 E. Sixth St.

Comments

Richard Heckler 1 year, 10 months ago

How is it that Conservatives make the best politicians due to their smart business talents?

I can say that the above thinking has been questionable for some years now and I believe the Governor Brownback administration has become the epitome of nonsense.

KPERS concerns have been on my mind for awhile. The Governor Brownback administration has effectively put retirement plans for thousands in jeopardy.

Is it the taxpayers responsibility to bailout conservatives mismanagement of tax dollar budgets? Like the governor supported in Washington D.C. I say no way jose'!

So if Jeremy Farmer can be busted for alleged embezzlement and fraud why is it that like alleged charges cannot be brought against Governor Brownback and associates? Isn't it time for the Brownback administration to resign?

I say Kansas voters would love the opportunity to participate in a special election.

Larry Sturm 1 year, 10 months ago

I agree Richard that the governor and his legislative cohorts need to be taken to task for what they have done to the financial state of Kansas.

Randall Uhrich 1 year, 10 months ago

Brownback must have had Farmer handling the fund! BTW, Sam is already named as The worst governor in the United States!

Dustin Morris 1 year, 10 months ago

I would remind folks that under those pesky conservatives stability in KPERS has actually increased. So...

Dorothy Hoyt-Reed 1 year, 10 months ago

How is delaying payments to KPERS stable? How is using KPERS to try and balance your budget good governing? The only reason KPERS is doing okay is the stock market is doing well, and that is sure not Brownback's doing.

Bob Summers 1 year, 10 months ago

When the hired help complains about their overly abundant pay, fire them.

Marc Wilborn 1 year, 10 months ago

The article actually blends two issues into one. Sure, KPERS has an unfunded pension liability - it probably always has. Is it bigger today then in past years? Sure, part of which is poor asset return, part is low/lack of adequate funding and lastly, lower interest rates used to determine pension liabilities.

The other issue is that Lawrence is now required to include their unfunded portion in their financial statements. Most entities who loan Lawrence money know better than to think that Lawrence didn't have an unfunded pension issue prior to 2015 when it wasn't required to be included. State contribution rates may be forced to increase but this will be a result of many different issues.

Freeze and protect the current system for those in or near retirement (45 and above) and put the rest in a 401(k)/403(b) plan.

Sam Crow 1 year, 10 months ago

"Sure, KPERS has an unfunded pension liability - it probably always has. Is it bigger today then in past years? Sure..."

Actually, according to KPERS most recent annual report year ending 2015, the funding level of the total system is 63%.

In June 2010, the democrats last year in the governor’s office, it was 59.9 %. It had decreased each of the previous five years from 68% in 2007. In January 2005 it was 70%.

The stated goal in the report is 80%, which is the standard goal nationwide.

The most recent data indicates the public union heavy Illinois is the worst performing pension plan in the country with a funding level of 39%.

Marc Wilborn 1 year, 10 months ago

Yes, but you have to look at the reasons each year why the unfunded liability percentage changed.

Barb Gordon 1 year, 10 months ago

My understanding is that the unfunded liability has a lot to do with state lawmakers dipping their hands in the cookie jar. And that's been going on for a very long time.

Michael Kort 1 year, 10 months ago

So, we are going to get from 63% to 80% funded by giving 330,000 LLCs a get home tax free card on their earnings ?

Reaganomics didn't work back then, nor is it work in its' current reincarnation as Brownienomics .

So they gave the investment bankers more money to baby sit ....as if near zero interest rates are going to make anyone in the "wide open no walls lending and investing environment" any money ?

Isn't that just like rewarding your supporters ( by accident ) because they are probably charging a percentage for watching the store for the state .

Pensions are supposed to pay like a " financially liquid clock " ( dependably ) and maybe until death does them part or whatever .

Anything can happen with a 401 K . ( There are black swans events that we have never seen before that can happen.....and those never happen till they happen )

Michael Kort 1 year, 10 months ago

OH.....are they still getting rid of the Lawrence City Auditor ?

beth newman 1 year, 10 months ago

Every working class wage slave will have to work in retirement. Untill the working class can take social security away fron the elites who rob it with impunity,intentionally destroying it, then do the "see I told you so-privitize it to wall street"...untill the working class can form it's own social security bank...good luck with that retirement thing...

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