Special Board of Aldermen 09-21-2021 Page 13
liabilities we've added since then primarily due to the rate decrease. To the Mayor's point is going to be paid off in a 20
year layer between 2023 and 2043. So basically we won't be 100% funded by 2039. We don't have to ever be 100%
funded again unless the markets, you know, put us over the top, but this layered amortization sort of creates a future
buffer so that, you know, the liabilities can't grow to the extent that they have that you all are having to pay for in this
moment in time.
Taking 20 year layers of two year, you know, funding return increments going forward - and that includes gains - so this
2021 is going to probably be a gain that we'll be recognizing over 20 years as well. Some of that 26.8%. So it has
smoothed it out. It doesn't take away any of the short term pain, you know. We're not saying that but it was a
recognition, you Know, by the Commission, and legislators, and our Board supported the idea as well that this is a way to
get closer to 100% funded but not having to have this, you know, audit, this holy grail of 100% you know I'm July 1* of
39 or June 30" of ‘39 | should say. So you know there is a little more wiggle room in that now because future gains and
losses are going to be spread out. This will be the fourth year since 2017. So it’s not smoothing anything much out yet.
Most of that debt is still being paid off on top of the existing debt. But the layered amortization, again, it's a very good
circuit breaker to keep the liabilities and the funding from getting to where they were in the past. So you know if we can
get into a 90 plus percent funded, as Jim pointed out, it's a lot easier to withstand a market downturn. In that case, you
know, we lost probably 8 to 10% of our funding ratio and from the low 60s to the lower 50s back in 2009.
State of Wisconsin, which is one of the sort of gold standard plans out there, they were 100% funded in 07. They went
down to like 94, you know, and then they got back to full funding fairly quickly in the early 2010. So, you know, the closer
you are to full funding, the easier it is to absorb those market swings.
President Wilshire
Attorney Bolton.
Steve Bolton, Corporation Counsel
Is it possible to do more layers and extend things out further? And what | mean is, you started you had a 6 billion
unfunded mandate. And you say, okay in 30 years, we're going to take care of 5 billion of that and then we're going to
give ourselves another four years to deal with that last 1 billion. Could you said okay in 30 years, we'll take care of the
first half - 3 billion - and then over the next 10 years, we’ll take care of the next 1 billion, and then 10 years further to take
care of another billion, and then 10 years further, another billion? So it will take 60 years instead of 30 years but it
spreads it out further. You're always making progress and you don't get these big hits and then dramatic drop off at
some point. Maybe at 60 years you get a drop off but the drop off is being gradual and presumably the increases to
municipalities would be more gradual than there they are under the current plan. So would that work?
Marty Karlon, Director of Communications and Legislative Affairs
From perspective of actuarial standards, you know, and accounting standards, they promote this theory of generational
equity so that the debts that are accrued, you know, the same generation of taxpayers is paying for it as, you know, who
were there at the time that the liabilities were accrued. Standards are like 15 to 20 years is what they would consider a
generation for the purpose of funding liability. So it would be...
Steve Bolton, Corporation Counsel
It would be certainly not what's happening under the present plan.
Marty Karlon, Director of Communications and Legislative Affairs
Absolutely. You folks in New Hampshire are the poster child for what happens when there isn't generational equity
because honestly, you know, anybody who, you know, bought a house 10 years ago, the person who was living there 20
years ago had a pretty sweet deal and you're paying for it now. We need to get away from that.
Steve Bolton, Corporation Counsel
But stretching it out over time seems to be fair in other circumstances. But anyway, so it could be done. You're just
saying it would deviate from the principle of generational equity.
