Pension task force to study funding

April 11, 2012 07:59 AM
Mayor Garza has initiated a task force to review the financial condition and outlook of the city's three pension plans, report its findings and make recommendations to address unfunded liabilities.
"I have created a Pension Funding Guiding Committee that will identify, assess and develop feasible funding options which will be used to form recommendations to the City Council. Addressing the growing unfunded accrued liability of the city's pension plans, in a long-term financially sound manner is important for maintaining the overall fiscal stability and crucial for the city to meet its fiduciary responsibility to the plans' members," stated Sal Garza, Mayor. "This initiative will bring together representatives of the various stakeholders for the first time."
The 14 member Pension Funding Guiding Committee will include the City Manager, City Treasurer, City Clerk, Police Chief, Fire Chief, a member from the Police Pension Board and the Fire Pension Board, members from the three unions representing city employees (IAFF, PSEO and ASFME), and a retired employee representing each of the three pension plans. The Mayor will serve as Chairman of the task force.
Galesburg City Clerk Kelli Bennewitz added, "I think it will be important for this committee to explore issues within the Fire and Police Pension funds regarding the underfunding and develop ideas for consideration that would help eliminate this liability. The fiscal health of Galesburg is critical for our community's long-term viability. Managing the city's operations, which include both pension funds (Police and Fire), in a fiscally responsible manner is critical to retaining current residents and for generating long-term economic growth in our community."
Pension funding for the three defined benefit plans comes from three sources: member contributions, employer contributions, and investment income. Over the past 10 years, the funding ratio for each of the three funds has dropped significantly. The formation of the task force is an effort to be proactive and receive input from affected stakeholders.
"Current financial tools and investment instruments need to be reevaluated towards achieving greater funding performance. New tools and investment opportunities will need to be explored with the full understanding of the associated risks and potential benefits, "Garza added. "In this manner, we will seek out more effective strategies that help to reduce the possible future tax burden on our residents and keep the pension funding requirements from overly encroaching on the general fund that supports other important aspects of the community."
Marvin Dahlberg, City Treasurer said, "I commend the Mayor for forming this task force to study pension funding and make strategic long-term recommendations that will have benefits for the city, taxpayers, and the plan participants. I look forward to working with the Task Force to find solutions which will improve the interests of all concerned parties."
The task force will be asked to provide its findings to the City Council by August 31, 2012. By that time, the group will have become familiar with the financial outlook and condition of the pension funds; had opportunity to review alternatives for addressing unfunded liabilities, including but not limited to the use of pension obligation bonds; and be able to provide a summary of activities and recommendations to the City Council for its consideration.


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