SHREVEPORT, La. - It is a problem that has lasted for decades -- Shreveport's pension plan.
While pensions are currently being paid to current retirees, the money in the pension fund is drying up quickly. If something is not done soon future generations could inherit a growing debt.
KTBS took a close look at the numbers and asked the city for answers.
Shreveport City Councilman John Nickelson recently brought up the issue after a 21 page report was prepared by Milliman, a firm the city uses to evaluate its pension system.
The report showed the city where its pension system was today and where it will be in 15 years if contributions remain the same. Nickelson said the results are alarming.
"I was concerned because on the campaign trail one of the issues that I and other candidates discussed was the fact that the city's pension fund was only 48 percent funded,” Nickelson said. “Anything below 50 percent is considered severely distressed."
KTBS enlisted the help of Heard, McElroy, & Vestal LLC, a Shreveport accounting firm that doesn't have ties to the city. The firm broke down the numbers from the Milliman report and said the future of the pension plan was actually much worse.
"Right now, just with this one pension plan, the city has other plans, the total liability, according to this actuarial report, at the end of 2018, was over $400 million,” said Robert Dean, a CPA at Heard, McElroy, & Vestal.
That's how much the city would need to pay into their pension plan, today, to bring up to date. But, according to the Milliman report, the city has less than $175 million in savings, leaving them short roughly $242 million.
KTBS went to the city for their response and they had a different take.
"It basically is assuming that all of our retirees retire today which, of course, we all know is something that does not happen,” Sharricka Fields Jones said. “But, it is a number that by accounting standards we are required to report."
But KTBS's accounting expert said the real issue is what is the city doing, today, to fund the pensions the city promised to current and future employees.
According to the Milliman report, over the course of the next 15 years, the city has to pay $515 million in pension benefits. To make the formula work, the city needs to save roughly $35 million dollars a year.
But according to the report, they were only contributing about $10 million. Employee contributions and earnings on the savings kick in some, but according to KTBS's CPA, it's just not enough to keep up.
"This shortfall is building every year and it is building every year,” Dean said. “We are not making progress on it. That means more and more money, in cash, will have to come out of future budgets to pay for the past under fundings."
To contribute $35 million a year, the city is left with very few options. Either they make that money in investments, increase employee contributions or take the money away from other city services.
In 2014, the city made drastic changes to address the issue. They decreased the pension benefit of future employees."It also increased the contribution that the city was making annually,” Fields Jones said. “It increased the contributions the employees were making annually. That was a decision employees were also involved with."
But, as this report showed, even that was not enough.
Adding to the problem, the report assumes the city will make a 7 percent return each year on investments. However, last year, the city took a $7 million loss on its investments.
"This report, if we took it again today, would look a lot different,” Fields Jones said. “If the stock market performs a lot better going forward, which we expect it to, this picture would look a lot better as well."
Assuming the stock market does do better, KTBS's expert still does not believe it is enough
"We clearly do not have enough money set aside today to prevent us from having to suck money out of a future budget to pay a liability that was incurred,” Dean said. “It is putting it off. It is kicking the can down the road."
City leaders say they were taking the issue seriously and supposed to meet with the firm that reviews its pension fund.
"The board will have some opportunities to do some hands on discussions with their team and to look at different scenarios,” Fields Jones said. “Basically, like was done in 2014, was to put everything on the table and looking at the good, the bad, and the ugly, make those tough decisions and see what we can do.”
Fields Jones ensures employees current and future that they city will continue to keep its promise to pay employee pension benefits. That's something KTBS's CPA said will require major changes.