Sunday, July 25, 2010
Add to that a budget crunch in most municipalities and you have a recipe for disaster.
As you can tell from the letter below, taken from MPERS website, a contribution of almost 25% of salaries will be required from the participants to maintain the system. This is in addition to a 7.5% contribution from the individual officers.
The 25% is up from 11% last year.
One of the main problems has been investment in golf courses, the first of which was Olde Oaks, another being Stonebridge.
On top of failed investments in those cases, a $30,000,000 guarantee for Hal Sutton’s development of The Boots in central Texas has gone sour.
To fully understand the investments, read this article in the Baton Rouge Business Report.
March 19, 2010
TO: City Clerks and Chiefs of Police
FROM: Kelly Gibson, Chairman
RE: Contributions to MPERS
The Municipal Police Employees’ Retirement System has received inquiries asking for an explanation of the increase in employer contributions for this year. For a historical review and an in depth explanation of this increase I consulted the actuarial service used by MPERS (Mr. Charles Hall) and I am including his response with this reply.
The Public Employees’ Retirement Systems Actuarial Committee reviews returns of investments of the state wide retirement systems from the past year and mandates the salary percentage needed to keep the retirement system solvent. This year the committee determined that a contribution of 32.5% of salary was needed. Employee’s contributions are frozen at 7.5% thus requiring a contribution of 25% from the municipalities.
I realize that the employer’s contribution rate is a significant increase from the previous year. The downturn in the equities market and real estate market in previous years were the dominant reason for the increase. The MPERS board of trustees is exploring ways to reduce the burden of the percentage increase on the municipalities.
I haven’t investigated this in any depth, just familiarized myself with the basics just as you are doing here.
My question would be who advised the board to make these investments? Was it advised by professional investment counselors or was it decided by political considerations?
In what universe would something so risky be considered a decent investment for a retirement system?
This was one of the problems with the Bossier City budget last fall that ensured layoffs and cutbacks in the Fire and Police Departments. I will dig into this more in the next few days and try to come up with some answers.