Pension fund could cost county
By Steve Herring, Kenneth Fine
Published in News on December 6, 2009 1:50 AM
An increase in the amount Wayne County has to contribute to the North Carolina Local Government Retire-ment System could cost the county about $480,000 annually -- or just under one pen-ny on the current tax rate.
The cities of Goldsboro and Mount Olive would also see an increased cost.
"This was absolutely not expected," County Manager Lee Smith said. "We have heard for years how stable this state fund was, and this could not come at a worse time. Our latest news was that the fund was secure and there had been no talk of this change until recently."
A decision should come next month on whether cities, towns and counties will have to increase the rate that has been steady for more than 20 years.
According to the state treasurer's office, North Carolina will have to increase employer contributions to the pension fund from 3.57 percent of payroll to 6.71 percent.
The demands for increased contributions are blamed mostly on last year's fall in stock values. That drop damaged the earnings of the pension funds the state maintains for teachers, state workers and other employees.
"This item will have to be discussed in the budget process but the majority of this cost will be local funds," Smith said. "As with any budget issue, the budget committee will have to make a recommendation to my office for a formal recommendation to the board of commissioners.
"It (the rate) has never been this high before. I am not sure about future changes to the fund. That will depend on the investment market and the level of retirees anticipated. I cannot speculate on the changes to benefits here in Wayne County until we get deeper into the budget process in early 2010."
If the change goes through, the city of Goldsboro would also be affected -- to the tune of roughly $270,000 a year -- Finance Director Kay Scott said.
"It's something that we have to look at. This was kind of an unexpected cost," she said.
The town of Mount Olive is in the same boat.
If the change goes through, the town of Mount Olive will also have to pay out additional funding for its employees. Town Manager Charles Brown said he is watching the situation.
"I don't know if concern is the proper term. We will definitely have to deal with it from a budget standpoint, that's just a fact of life," he said.
A 1.55 percent increase in employer contributions would cost the town about an additional $31,000 a year, he said.
The measure could potentially affect decisions regarding the upcoming budget year, and it is likely the measure will go through, Brown said.
"If the measure passes, and it appears the odds are good that it will, we will have to make adjustments in our 2010-2011 budget," he said.
Besides potentially having to pay out the $31,000 into the retirement fund, Mount Olive will also be short an additional $30,000 next year. The state withheld 66 percent of Mount Olive's beer and wine revenue.
The loss of revenue would not be as big an issue if it were any other year, but in light of the economic situation, it is a problem, Brown said.
"It could be worse, it could be a bigger amount, but still in terms of our payroll, it is significant," Brown said.