Luzerne County taxpayers must pump an estimated $9.4 million into the employee pension fund to keep it stable next year — a $929,000 increase and new high, according to county figures.
County Manager Robert Lawton has cited the rising pension subsidy and the need to get caught up on past subsidy as one of the reasons he’s proposing an 8-percent tax hike for 2014.
The county’s 2014 budget must absorb a $1.7 million increase in pension fund contributions, Lawton said.
His administration inherited overdue subsidies because prior officials put off payments when money ran out, which causes the fund to miss out on potential earnings. Lawton said he is trying to get caught up so subsidies are paid the year they are due or adding interest to compensate for lost investing opportunities.
The county has paid $5.4 million into the fund this year to date for subsidies owed for 2012. Human service branches and other county agencies operating on state, federal or other outside funding kicked in an additional $600,000.
But the county still owes $5.4 million for 2013 in addition to $2.45 million to be paid by other outside-funded county agencies, said county Retirement Coordinator Rick Hummer.
Hummer doesn’t expect a decrease in the pension subsidy for years.
Taxpayers have put $61.9 million into the fund since 2002, records show.
Shoring up is necessary to close a shortfall that emerged years ago.
The fund relies on investment earnings and employee contributions to cover present and future obligations. Taxpayers must pick up the slack when revenue falls short because the pensions are guaranteed by law.
The gap between fund assets and projected liabilities was pegged at $50.7 million in 2010 but was whittled down to $37.7 million at the end of 2011.
However, the difference has grown again to $41.7 million based on a new actuary report presented during Wednesday’s county Retirement Board meeting.
Some of the increase stems from workforce reductions that have lowered employee contributions into the fund and a strategy to keep taxpayer contributions higher over time so there won’t be sudden spikes, officials have said.
The annual taxpayer infusions started out at $313,000 in 2002 and rose to a previous high of $9 million in 2010, records show.
The fund spends about $15.5 million annually on pensions to roughly 1,100 retirees.
About 1,450 employees are paying into the system.
The fund was valued at $206.57 million at the end of September, compared to $151 million when fund advisor Morgan Stanley Smith Barney took over as advisor in September 2008. Despite the gap, officials say the fund is positioned favorably compared to many others in the public sector.
It is 85 percent funded, which means the fund is equipped to pay 85 percent of its future obligations if the county shut down today, Lawton said.
Lawton pointed to state retirement systems funded at 69 and 75 percent and said many major cities have plans funded below 50 percent.
“Very few are 100 percent funded,” he said.