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Franklin Co. retirees get raise

December 16, 2008|By DON AINES

CHAMBERSBURG, Pa. -- Despite Franklin County's pension fund losing millions of dollars this fall, the approximately 240 retired county employees will be receiving a 2.98 percent cost-of-living increase in 2009.

The Retirement Board voted 3-2 on Tuesday to give an increase based on 85 percent of the increase in the consumer price index (CPI). County Commissioners Bob Thomas, Bob Ziobrowski and David Keller voted for the increase, with Treasurer David Secor and Controller Carol Diller casting the dissenting votes.

Secor recommended the board suspend cost-of-living increases for five years, based on the plunge in stocks and what taxpayers might have to pay to fund the defined benefit plan over the next few years.

"I have a concern about where it seems to be headed for over the next five years," Secor said. As the county's pension obligations increase, so will its contribution -- and that of taxpayers -- to the fund, he said.

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The county pension plan will pay retirees about $2 million in 2008, up from $1.6 million in 2007, Diller said. The increase includes the cost-of-living increase and other factors, such as the number of people drawing pensions, she said.

The 2.98 percent cost of living increase will result in a $723,567 increase in the county's liability -- what it owes -- to the fund.

The county contributed $1.1 million in tax dollars to meet its 2007 annual required contribution (ARC) and $1.5 million in 2008. The 2009 budget approved by the Board of County Commissioners last week included an additional $2 million to meet the county's ARC, Thomas said.

"The biggest reason is the decline in the stock market and to keep the fund actuarially solvent," Thomas said.

Ziobrowski said the effect of not granting a cost-of-living increase would amount to a decrease of thousands of dollars to individual retirees over the next 20 years at a relatively small savings to the county.

"I'm just hesitant to make a knee-jerk reaction" based on recent market conditions, Ziobrowski said.

"Two weeks ago I was thinking we could not do this," Thomas said of the increase. Since then, however, "I have come around full circle and figure we owe it to these folks."

The county pension fund took a huge hit since the end of September, when it stood at about $62 million, Secor said later. By Nov. 30, the fund had fallen to $51.4 million, according to the county's investment consultant.

"October was the worst 30-day period in the history of the stock market," Secor said.

"I think in these economic times, everyone is being asked to economize," Diller said of her vote against the increase. The county is not required to give a cost-of-living increase every year, just to evaluate it every three years, she said. The county has given cost-of-living increases for 12 straight years, she said.

Yet to be determined by the retirement board is the guaranteed rate of return on the contributions to the pension fund by the more than 900 county employees. Employees contribute 9 percent of their wages to the fund for a guaranteed rate of 5.5 percent.

State law requires a rate of return between 4 percent and 5.5 percent, which is another component of each employee's pension. When investments are moving into negative territory, however, the county must still meet that rate of return, Secor said.

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