Actuarial Fiscal Note
Date Requested:January 11, 2018
Time Requested:10:20 AM |
| Agency: |
Municipal Pensions Oversight Board |
|---|
| CBD Number: |
Version: |
Bill Number: |
Resolution Number: |
| 1138 |
Introduced |
SB98 |
|
|---|
| CBD Subject: |
Counties, Municipalities |
|---|
|
Retirement Systems Impacted by Legislation:
Municipal Policemen's and Firemen's Pension and Relief Funds
FUND(S):
53 individual muncipal funds
Sources of Revenue:
Other Fund NA
Legislation creates:
A New Program
Actuarial Note Summary
Impact this measure will have on the liabilities and contributions associated with the retirement system(s).
It appears this legislation would require the State to provide a twenty percent matching payment of the actuarially determined municipal amount on an annual basis for ten years. Assuming all 31 municipalities consolidated with neighboring municipalities or counties, the new state contribution of the twenty percent matching contributions for FY2018 would be $9.6 million as the total municipal contributions to the 53 municipal pension plans for the same period is $48.2 million.
The additional state match for 10 years at an estimated $96.3 million would certainly assist the underfunded municipal police and municipal fire pension systems.
The next section is impossible to complete as the note assumes one pension plan is assisted, and in this example all 53 plans would receive additional payments from the state.
Fiscal Detail of Actuarial Impact
Impact on current benefit costs, prior service benefit costs and ongoing contribution requirements following full implementation.
| Impact On |
Following Full Implementation |
| Increase in Unfunded Actuarial Accrued Liability |
Initial Impact on Annual Contribution Requirement of System(s) |
Contribution Increase as a Percentage of Annual Payroll |
| Total Annual Costs |
$0.00 |
$0.00 |
0.00 % |
| Normal Cost of System |
N/A |
$0.00 |
0.00 % |
| Past Service Liabilities |
$0.00 |
$0.00 |
0.00 % |
Fiscal Year Past Service
Amortization Period Ends |
N/A |
NA |
N/A |
Explanation of above Actuarial estimates:
Based on the proposed legislation, it appears any municipality which successfully complete a municipal consolidation is then entitled to a twenty percent match of its required contributions to its municipal police and municipal fire pension systems on an annual basis for ten years.
Based on this type of situation, there would not be an impact on the existing required contributions unless the intent is to reduce the municipality's required contribution by the same amount of the state's new payment to the pension benefit account. IF this new funding would be considered a replacement to what would have been required of the municipality, then there would be no net increase or decrease to the existing pension funds.
Analysis of Impact on Public Pension Policy:
It appears the intent of the bill is to assist any municipality which consolidates with another municipality or county by providing twenty percent additional revenue from the State to the actuarially required employer share annually for ten years which should reduce the unfunded actuarial liability in future years or to simply provide the funds which would reduce the amount the municipality needed by twenty percent each year for ten years which would not reduce the unfunded actuarial liability.
The bill does not provide for a funding source for this new twenty percent match from the State.
Fiscal Note Summary
Effect this measure will have on costs and revenues of state government.
The bill would increase the State's responsibility to pay twenty percent of a municipal required contribution to its municipal policemen's and its municipal firemen's pension and relief fund. For FY2018, the twenty percent figure would be $9.6 million of the $48.2 million due from municipalities. Conservatively, this figure would be an additional $9.6 million per year for the next 10 years, or a minimum of $96.3 million total. The likelihood of the annual figure of $9.6 million remaining stagnant is unlikely. The most prudent estimate would show increases in the required municipal contributions over the next ten years.
Also, the funding source for the State is not determined in the bill.
Fiscal Note Detail
| Effect of Proposal |
Fiscal Year |
2018
Increase/Decrease
(use"-") |
2019
Increase/Decrease
(use"-") |
Fiscal Year
(Upon Full
Implementation) |
| 1. Estmated Total Cost |
9,634,971 |
9,634,971 |
9,634,971 |
| Personal Services |
0 |
0 |
0 |
| Current Expenses |
0 |
0 |
0 |
| Repairs and Alterations |
0 |
0 |
0 |
| Assets |
0 |
0 |
0 |
| Other |
9,634,971 |
9,634,971 |
9,634,971 |
| 2. Estimated Total Revenues |
0 |
0 |
0 |
Explanation of above Fiscal Note estimates (include possible long-range effect):
The FY2018 municipal contributions to municipal policemen's and municipal firemen's pension and relief funds is $48,174,856 according to the latest actuarial consolidated report from GRS Consulting, which is the actuary on contract performing actuarial studies for each of the 53 municipal policemen's and firemen's pension plans in WV. Assuming each municipality consolidates with another local government and becomes eligible for the twenty percent State match the State would become responsible for annually for the ten year period. The FY2018 municipal contribution figure will likely increase in future years due to actuarial assumption changes which are required to be reviewed at least once every five years.
There is not a revenue source identified in the bill, thus the estimated total revenue is zero for all years.
Memorandum
The bill does not identify the source of funds that would be available to pay municipalities which successfully complete municipal consolidation. The bill simply states the State would provide a matching payment from the State in the amount of twenty percent of the annual municipal actuarial contribution to the benefit fund created in ยง8-22-1 et seq for a period of ten years following the consolidation.
This begs the question, would the state match be in addition to municipal contributions or to replace 20% of municipal contribution. The majority of existing municipal policemen's and municipal firemen's pension plans in WV are very poorly funded and need as much funding each year as possible.
Person submitting Fiscal Note: Blair M. Taylor
Email Address: blair.m.taylor@wv.gov