Mary Hansen
The State Journal-Register
In an effort to bring more transparency to how pension debt payments are calculated, Ward 7 Ald. Joe McMenamin has proposed changes in how the city awards contracts for actuarial services.
“This is a situation that I think, because of the financial impact that actuaries have on city finances, that we really need to take a closer look at not just the contract, but the services that relate to the contract,” McMenamin said at Tuesday’s Springfield City Council committee meeting. “… If the performance deviates from what we expect, then we would not want to continue that contract for the second and third years.”
According to the city’s budget office, the city has two or three of these contracts a year to advise them on how much it should plan to pay for health insurance and pensions. The contracts are usually below the $25,000 threshold for council approval. The proposal would make an exception and require the council to review all agreements with actuarial firms.
Budget director Bill McCarty, who oversees some of the contracts, said he views them as routine. There is also an advantage to working with a firm year after year as they become familiar with the city’s processes, he said.
“Ultimately, my concern a little bit is that there seems to be an impression that the reason our liability is growing is that our actuary has been wrong,” McCarty said. “And certainly someone could potentially argue that. But the actuary doesn’t control the stock market, they don’t control the operations or pension spiking, or when the legislature provides new benefits. The city of Springfield is not alone in its pension liability.”
Still, McMenamin argued that actuarial miscalculations of how much the retirement funds would earn in the stock market was one key reason for ballooning pension debt. “I think it’s good for the council to get involved in the selection of actuaries and reviewing their performance,” he said. “I think this is healthy accountability.”
The council could vote on the ordinance at next week’s meeting.
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Joe McMenamin for Ward 7 