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The Coconino County Board of Supervisors approved payments to pension liabilities that will result in a $30 million savings over the next 20 years for county taxpayers
The Coconino County Board of Supervisors approved payments to pension liabilities that will result in a $30 million savings over the next 20 years for county taxpayers. The Board approved a $10 million, one-time payment to the Public Safety Personnel Retirement System (PSPRS), with funds from the Capital Facilities Fund. Additionally, the Board also approved the use of Jail District Fund Balance to pay an additional $5.5 million contribution to the Arizona Correction Officers Retirement Plan (CORP).
Over the past several decades pensions have been impacted by lower than expected investment returns, unanticipated impacts from benefit increases (DROP and PBI programs) and adjusted actuarial assumptions such as life expectancy and population growth. These impacts have created a pension system that is substantially underfunded. Recent court cases have reinforced the Arizona Constitution language that protects changes to pension benefits. Pension liabilities are essentially a debt that will be paid, if not now, then in the future at a higher cost to taxpayers.
Coconino County adopted a Financial Planning process in 2007 to establish a process to address financial risks and opportunities as investments for the County over a long-term planning horizon. Included in this process is the alignment of mission critical operating costs balanced with recessionary revenue forecasts that create the capacity of one-time funds to address legacy costs such as lagging investment in infrastructure, including facilities, and unfunded pension liabilities.
These payments approved by the Board will result in reduced pension contributions over the next several decades, secure pensions for retired deputies, provide facility infrastructure funding that keeps the Capital Facility fund and Jail District on track for facility needs and saves a projected $15 million over the next 20 years net of the initial payment and estimated interest expense for a facility related debt issue.
As part of the Board’s approval, the related reduced pension contributions will be accumulated to continue providing funding for capital facility needs and could provide the debt service funding for facilities when needed.
“I’m proud that previous Boards and my colleagues on the Board had the political will to adopt a financial planning model to establish a sustainable financial opportunity and to take this innovative and smart approach to pay down the County’s debt while saving future taxpayer dollars,” said Chairman Art Babbott. “We are tackling the PSPRS and CORP issue now and not passing it on to future Boards or generations of taxpayers. This investment, which has been recognized as a financial industry best practice, will reduce our future liability and allow us to use County resources strategically.”
Over the last few years, the Coconino County PSPRS funded status will have increased from 25 percent to 71 percent and the CORP funded status increased from 60 to 95 percent. These current payments and the additional contributions over the last few years provide a cumulative projected net savings of nearly $30 million over the next 20 years, and the reduced contributions will continue many years beyond this projection.