Finance Committee Page 5
March 2, 2016
Mr. McIntire
Probably, yes. | thank you for that question because | think that it is important for readers and listeners to
understand because it’s such a significant account balance that there is a funding schedule of the city and all
of the underlying employers who are following to help mitigate this liability.
Alderman Siegel
Thank you. | think we are all too painfully aware of the funding liability. It was just that it is a very large
number and | wanted to understand if that was the overhang that we have to pay back because of the handling
of the state pension funds in the past or if that was really a combination of that plus ongoing obligations over
some period of time. You have answered that, it’s the overhang over the next 23 years that we are obligated
to pay.
Mayor Donchess
As a follow-up to the last questions from Alderman Siegel, on the current schedule the pension would go to a
100% by 2039, do you know what the assumption is with respect to the rate of return that will be achieved with
the assets that are in the state pension fund in order to arrive at that 2039 date?
Mr. McIntire
| got really lucky. | happened to turn to page 82; | honestly didn’t have it tagged. The current discount rate
that’s used is 7.75% and to the GASB credit, some of the required disclosures, on page 80 — 82, is here’s
essentially what the net pension liability is using the current discount rate that the Mayor just spoke about at
7.75%. Then adjacent to that disclosure is what the liability would be if that discount rate increased by a
percent or decreased by a percent. | think that’s probably a really good disclosure for financial statement
readers to take a look at because there can be significant fluctuations and it is widely anticipated that this net
pension liability will have significant swings based on market results of operations, more than in the past and
the reason for that is the underlying requirements and the new standards on what are acceptable actuarial
estimating techniques.
Mayor Donchess
What are the numbers for 1% less and 1% more than 7.75%?
Mr. McIntire
If we were looking at a liability in the range of $184 million before on page 33, if the discount rate increased a
percent then the liability drops to $135 million and if it decreased by a percent then the liability increases to
$244 million.
Alderman Siegel
It’s $50 million a point.
Mr. McIntire
| did try to draw a distinction between the long-term perspective and the short-term perspective financial
statements and it’s for that very reason, Mr. Mayor and committee members that | recognize that talking about
that net pension liability number is a daunting number. Hopefully we have done a reasonable job at helping to
putting it into perspective talking about the funding schedule and the like. While it's necessary for us to bring
