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Friday, July 14, 2006 | Whoa! Hold up a sec’. Am I understanding Fred Sainz’ comment to Scott Lewis correctly?
If the city (correctly) thinks that the Corbett settlement is a “real” liability rather than a contingent liability, it follows that they think the pension system’s valuations are incorrect dating back to 2000.
That’s because the pension system has treated the liability as contingent (upon excess earning) and therefore not included it in the unfunded liability.
A “correction” of the treatment would have the effect of increasing the unfunded liability. If the unfunded liability is increased, then that means the annual payment on that liability should have been increased. Put another way, the Annual Required Contribution (ARC) should have been higher.
If you continue down that line of reasoning, it means that the city has knowingly (both in the past and currently) booked an understated pension liability and knowingly budgeted an ARC amount lower than required.
Doesn’t sound like a nuance to me.