Since being elected Chester County controller and joining the Retirement Board in 2006, I have become increasingly concerned about such assumptions. Elected officials are often reluctant to cut spending, and they can use unrealistic assumptions to defer government obligations to fund pension plans. Such gimmicks pass the burden on to future policy-makers and, ultimately, future taxpayers.
Fortunately, the Chester County Retirement Board has avoided using unrealistic assumptions to defer obligations. And it's worth noting that counties' pension benefits are generally more in line with the private sector than those of school districts and the federal and state governments.
However, all taxpayers should remain vigilant about the pension crisis. Even in Chester County, where elected officials have been conservative in their approach, there are challenges ahead.
Our advisers say the county must maintain a rate of return of 7.5 percent on its investments, year in and year out, to maintain the status quo. If we earn less, we will fall behind on our obligations, and the taxpayers will have to make up the difference.
Earning 7.5 percent on a well-diversified portfolio of stocks each year is never easy. In this economy, it would require extraordinary skill and a good deal of luck.
It's even more difficult for governments, which must keep sizable portions of their retirement funds liquid to pay current retirees. In Chester County, we must maintain up to 35 percent of the fund in bonds and cash, which traditionally yield much less than 7.5 percent. Thus, the remaining 65 percent of the fund has to earn better than 11 percent. If we fall short of that, we must make up the difference with contributions from the general fund - that is, taxpayers.
