Montco controller wants county to address retirement fund

Posted: July 17, 2014

In a report Tuesday, Montgomery County Controller Stewart J. Greenleaf Jr. said an underfunded pension system is a blemish on the county's otherwise improving financial outlook.

The county ended 2013 with an operating surplus of $6.9 million, which it used to bring the reserve fund closer to the recommended 10 percent level. But the county made only $3.4 million of its required $11 million payment to the retirement fund.

Greenleaf said the county should commit to making the full required retirement payment in 2014.

"How can you say you really have a surplus when you didn't pay all of your obligations?" Greenleaf asked in an interview.

Chief financial officer Uri Z. Monson said the county was not ignoring the pension payment, but placed a higher priority on building up the reserves, which had been drastically depleted under previous administrations.

Monson noted that although the pension system's funded ratio dropped from 92.3 percent in 2012 to 91.3 percent in 2013, it remains well above average.

"I'd love to be at 100 percent, but there are finance officials across the country who are very, very envious of our 91.3 percent," he said, adding that the national average for public pensions is about 70 percent funded.

The county budget passed for 2014 - which includes roughly $17 million in proceeds from the sale of the Parkhouse senior center - anticipates the reserve fund rising to the 10 percent recommended level, and paying $3.8 million of the $10.7 million owed to the pension system.

Greenleaf said the county should put the Parkhouse money first toward making the full pension payment, and then toward growing the reserve fund.

"You have this cash, you can pay that [annual required contribution] and still have a year-over-year increase in the fund balance," Greenleaf said.

Monson said the $3.8 million "is the minimum we're going to do. If we have the opportunity to pay more, that's the recommendation that we'll make to the commissioners."

Greenleaf also praised the commissioners for soliciting bids for a $55 million bond issue in May. The "novel approach," Greenleaf said, resulted in a lower interest rate.

But he said the county delayed most principal payments on that bond until 2019, "leaving the bulk of the debt burden for future administrations."

Monson said that was done out of necessity because previous debt had been refinanced and locked the county into high payments for the next few years. Paying less principal on the new bond at first will allow the county's total debt payments to remain relatively flat over time, he said.

"The decision to do that had nothing to do with who would be in office at the time," he said. "It had to do with managing an extremely difficult debt portfolio."


BY THE NUMBERS

$6.9M

Deficit for 2012 year-end operating balance

$6.9M

Surplus for 2013 year-end operating balance

$17.1M

Reserve fund balance

in 2012.

$24M

Reserve fund balance

in 2013.

$0

Paid to pension fund

of $11.7 million owed

in 2012.

$3.4M

Paid to pension fund of $11 million owed in 2013

$407.5M

Outstanding debt in 2012.

$426.7M

Outstanding debt in 2013.

SOURCE: Montgomery County


jparks@philly.com

610-313-8117 @JS_Parks

www.inquirer.com/MontcoMemo

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