Footnotes in a newly released financial report, coupled with major investment losses over the past several months, show Fort Bend County’s retirement system may be seriously underfunded.
The issue came to light Tuesday as Fort Bend County Commissioners Court members accepted the new Comprehensive Annual Financial Report for the year ended Sept. 30, 2008.
One footnote in the report shows that, on an actuarial basis, the county’s retirement system had a liability of $25.6 million as of Dec. 12, 2007.
In addition, the Texas County and District Retirement System, in which Fort Bend County’s retirement contributions are invested, lost almost 29% of its asset value over the course of 2008.
Precinct 3 Commissioner Andy Meyers said that, by state statute, Fort Bend County is obligated to make up its share of that 29% loss. He said the state retirement system has not yet informed the county what that exact amount will be, but said it could amount to between $25 million and $50 million.
Making up such a shortfall would not have to be done in one lump payment, but Meyers said he’s seen an estimate indicating the county may have to contribute an additional $2 million per year over perhaps 20 years.
At Tuesday’s meeting, commissioners raised questions about the validity of calculating the county’s potential retirement fund liability on a actuarial basis.
County Auditor Ed Sturdivant, who presented the financial report at the meeting, said he would prefer to make a separate presentation on the implications of the retirement system footnote.
Sturdivant did not return a phone call seeking comment for this story.
Other footnotes in the financial report drew commissioners’ attention as well. One note purported to show the annual cost to the county of employee medical benefits. Actuarial tables again were used to estimate the cost, which totaled more than $24 million.
Sturdivant told court members that “currently we’re spending $3 million” for those benefits. In the report, “they’re saying our actuarial net value is $24 million.”
Precinct 1 Commissioner Richmard Morrison asked about a risk-management note in the report that showed the county had more than $6 million in unpaid claims involving worker’s compensation, auto liability and “general liability.”
“That’s another section of the budget where we don’t fund adequately,” Morrison said.
“We’re coming up short,” Sturdivant replied.
On Wednesday, Myers said he was surprised to learn that the county has a retirement fund liability of more than $25 million, because when he began serving as a commissioner in 1998 the county had just taken drastic steps to deal with a retirement fund liability of $24 million.
At that time, the county had been contributing an amount equal to 7% of employees’ pay to the retirement fund, but to deal with the shortfall, the county began paying close to 11% of employees’ pay, and at the same time reduced retirement benefits going foward from 1998.
Now, despite the $25.6 million liability, and the 29% loss in the state retirement system’s assets, “we still have to provide the employees the amount we promised,” Meyers said.
Also, by law the retirement system is required to provide a return on employees’ money of at least 7%, Meyers said.
Because of that requirement, he speculated that the TCAD retirement system had become “more aggressive in their investments, and unfortunately they got creamed in the markets.”
“My concern is, you can’t continue to push this problem out,” Meyers said. “I want us to focus on it this year.”
Like other counties throughout the country, Fort Bend faces a difficult budget process because of the possible erosion of property value, so funding a new major expense in the coming budget likely will prove challenging.
“I don’t want to scare the employees to the point they think they’re not going to get their benefits,” Meyers said. “And I don’t want to scare the taxpayers. But they’ve got to recognize that we’re going to have to pay more for healthcare and retirement benefits, or at least retirement.”
About 330 retired Fort Bend County employees, or their surviving spouses, now receive benefits through the county’s retirement system.
Accepting a current financial report was required as part of the actions necessary to issue about $74 million in bonds for a new courts complex, which the court also agreed to do on Tuesday.
