County budget deemed ‘decent’
MANISTIQUE – The county’s finances are in “decent” condition, but an upcoming change to retirement fund reporting will likely cause problems, this according to the county’s auditor. The presentation of the county’s annual audit was given during a recent meeting of the Schoolcraft County Board of Commissioners.
Alan Stotz, of Anderson, Tackman and Company, the county’s auditing firm, explained during his presentation that the county’s financial statements are “materially correct” and the county had received a “clean opinion”.
“It’s the type of opinion that you want to get,” he said.
One point of concern, Stotz noted, would be the county’s retirement fund, held with the Municipal Employees’ Retirement System. This fund is currently underfunded by approximately $8.3 million. With upcoming changes to the way the state requires retirement funding to be reported, the county could run into trouble, Stotz explained.
“There’s going to come a time when they’re (the state) going to expect you to fund the underfunding of your retirement program,” he said. “You’re going to have a deficit, basically, with booking that kind of liability.”
While the county will not have to immediately begin reporting retirement funding within the audit, instead of the footnotes, where it was previously listed, Stotz encouraged commissioners to plan for it. He noted the state would not be as concerned with a deficit in this fund, as they tend to concentrate on the general fund.
“This isn’t what the state looks at to say you’re in deficit or you’re not in deficit,” he said. “This is where that liability will end up showing up when it comes time to book it.”
Stotz added that, although the retirement fund information included in the audit was not up to date, the county has remained “pretty static” with a funded ratio of 72-74 percent. Others are faring much worse, he explained, both throughout the state and within the county. For example, Stotz said the Schoolcraft County Road Commission’s retirement fund is only 52 percent funded.
“This is not unique to Schoolcraft County,” he stated. “It’s an issue faced by virtually every board that I’ve talked to – some better, some worse.”
Though the county’s retirement fund will eventually need to be funded, Stotz said the gap will not have to be closed all at once.
“This is something that’s spread out over a term of years,” he said. “It’s not like someone’s going to be coming to the county tomorrow and looking for $8.3 million to fund their retirement.”
Commissioner Dan LaFoille pointed out that the county “has little to no control” over the retirement funding other than the amount they put in. MERS decides how to invest the funds submitted by employees.
He also noted that the county recently submitted a County Incentive Program, required through the Michigan Department of Treasury, to the state. This paperwork will outline to the state the county’s plan for addressing the MERS underfunding.
“It’s certainly not being ignored,” LaFoille said. “We’re very well aware, but, again, it’s going to be a big task.”
Stotz noted that 2013 was a good year in the market, and that will show a slight closing of the gap in the MERS fund, but it would not go away completely.
As for the county’s fund balance, Stotz said the county is sitting with just over $1 million.
“Right now, we’re in a decent position,” he said. “We’ve had a break-even year with the general fund and showed a positive change in the fund balance of a little over $21,000.”
Stotz explained that any positive number added to a fund balance is a good move, and that the county has also done well by not incurring any long term debt. For example, the county hospital and road commission, he said, will have debt obligations out until 2051 and 2027, respectively.
The commissioners unanimously accepted the annual audit.
“I’d like to thank very much the treasurer’s office and the clerk’s office for keeping such clean books,” LaFoille said.