Beginning in 2015, every state and local government entity – cities, counties, school systems, water authorities, etc. - that provides their employees with retirement benefits must begin reporting how much they contribute to pension liabilities and expenses. In some cases, this could add millions of dollars of liabilities that previously did not have to be reported. In turn, that could possibly negatively affect the entity’s borrowing ability.
The level of the case-by-case liability will be largely dependent on the level of unfunded mandates state by state. Most states have pension plans funded only in the 60 to 80 percent range, but many are lower. Illinois has the lowest funding of pension plans, with the state only provide 40.37 percent. Georgia, by contrast, is ranked 8th in the nation in pension funding, with 82.49 percent funding, while Wisconsin leads all 50 states with 99.91 percent funding.
What does that mean for Thomaston and Upson County? It means more transparency, but little change otherwise. The Thomaston Times sent questionnaires to Kathy Matthews, Finance Director for the Thomaston-Upson School System, Jim Wheeless, County Manager, and Patrick Comiskey, City Manager. Below are the responses from Matthews and Wheeless. Patrick Comiskey is working on the city’s response, but was unable to finish it before this article went to press. We will present his answers in a later issue.
Kathy Matthews, Finance Director for the Thomaston-Upson County School System, said she does not believe it will have much affect on the school system, since they do not issue bonds or borrow money. She said the Teacher Retirement System of Georgia acturarists did an estinmate liability for each system, but was unable to list an actual amount.
Matthews added that she has no problem reporting the liability, because it has always existed. It is just that GASB has never required it to be reported until now.
Matthews believes open reporting of the pension liability is a good thing because it helps with transparency of goverment, but that people must understand its significance.
“It must be understood that the liability will be paid by the employer’s annual contributions to the plan over many years,” said Matthews. “Much like a homeowner with a 30-year mortgage. The requirement to record unfunded liabilities on the financial statements and in note disclosures should highlight the financial impact of pension plans in a more transparent manner. Each plan must be assessed individually based on the design and benefit structure of the plan, along with the funding policy of the plan.”
Upson County Manager Jim Wheeless agrees with Matthews that it will be helpful for people to see the specific amount the county contributes to the state’s unfunded pension liability.
Wheeless said for the county, that liability will be approximately $1 million. He added that the reporting of it should not affect the county’s ability to issue bonds or borrow money.
“Upson County’s bond rating is currently A+,” said Wheeless. “We do not anticipate that it will significantly impact our ability to issue bonds or borrow money.”
Larry Stanford may be reached at 706-647-5414 or on Twitter @LarryStanford7.