Linde analyzes pension data

The state of Illinois has the worst pension liability problem of any state in the entire country.

But the town of Longboat Key is in worse shape when it comes to pension liability using the town’s actual rate of return, according to Armando Linde, who retired from the International Monetary Fund three years ago.

The Country Club Shores resident and commission candidate recently assessed the town’s unfunded liability using a study by Moody’s Investor Services that looked at pension plans for all 50 states and compared it to those states’ annual government revenue.

The Moody’s study showed that 10 states had unfunded liability equal to or higher than the state’s annual revenue, with unfunded liabilities for Illinois reaching nearly two-and-a-half times the state’s annual revenue.
The town, by comparison, has an unfunded liability of approximately $27 million, more than twice its annual revenue of $13 million to $15 million.

Although freezing the town’s three plans reduced the unfunded liability, a state mandate that the three plans estimated rate of return (actuarial rate) be reduced from 7.75% to approximately 7% kept the town’s estimated unfunded liability approximately the same.

“Even if you use 7%, which is what the state wants us to use going forward, you still have unfunded liability that is more than twice the annual revenue of the town,” Linde said.

But the town’s three pension plans have generated an average of just 5.6%, according to Linde. When adjusted for the town’s actual 5.6% return, the town’s unfunded liability is approximately 310% of its annual revenues.

“It shows how important it was for the commissioners to freeze the plans,” Linde said.

Revenue vs. pension liability
Recently, Moody’s Investor Service numbers examined inflated pension liabilities of all 50 states and related that debt to the states’ annual government revenue. There were 10 states with unfunded liability equal to or higher than the state’s annual revenue. The worst state was Illinois, with unfunded liabilities that are almost two-and-a half times the state’s annual revenue. Moody’s reduced the discount rate (rate of return) the state used to estimate the present value of liabilities, which was around 7.5% to 8%, to returns that states were actually receiving.

Commission candidate Armando Linde used the town of Longboat Key’s pension data and unfunded liability to compare the town’s problems to some of the worst performing state pension plans in the country.

Click here to view chart depicting different states' pension liabilities compared to Longboat Key's.

Contact Kurt Schultheis at [email protected]