A Report on the Fire Fighters' Pension Commissioner's Texas Statewide Emergency Services Personnel Retirement Fund for Fiscal Year 2004
January 2005
Report Number 05-023
Overall Conclusion
The basic financial statements of the Fire Fighters' Pension Commissioner (Commissioner) for the fiscal year ended August 31, 2004, were materially correct. However, although current member benefits are not in jeopardy, for the second consecutive biennial valuation the actuary for the Texas Statewide Emergency Services Personnel Retirement Fund (Fund) has determined that the Fund is actuarially unsound. Specifically:
* The Fund had a $13,426,925 projected funding deficit (unfunded actuarial accrued liability) as of the end of fiscal year 2004. When the cost of amortizing that deficit over the statutory 30-year period is considered, the Fund had a contribution deficiency of $1,163,758 as of August 31, 2004. *The Fund must recognize $2.1 million in prior investment losses during the next four years, which could increase its projected deficit. *Because the Fund is actuarially unsound, Texas Civil Statutes require the State to make additional annual contributions of $680,847 to the Fund; additional annual contributions from other sources of $482,911 are needed to make the fund actuarially sound.
In June 2004, the Commissioner requested $604,992 and $612,523 in emergency funding (for fiscal years 2003 and 2004, respectively) from the Office of the Governor. Its Legislative Appropriations Request also contains an exceptional item request for $675,307 and $709,072 for fiscal years 2006 and 2007, respectively. The Commissioner is researching possible statutory changes that could help strengthen the Fund's financial position. The Legislature may need to consider making other adjustments (such as changing eligibility requirements, modifying benefits, or adjusting other funding methods) to restore the Fund's actuarial soundness.
In February 2004, we reported that the Fund's administrative expenses were relatively high. Although the Commissioner is implementing a number of administrative changes to improve efficiency and possibly reduce some administrative expenses, it is unlikely that administrative expenses will be reduced significantly in the future without legislative action.
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