CASPER, Wyo. — The City of Casper is looking to establish a sinking fund to pay its obligations to the state to help shore up the so-called “Fire A” pension plan for retired firefighters.
In March, Governor Mark Gordon signed a bill into law directing a total of $75 million into a legislative reserve account to shore up the Fire A pension fund. Without action, funding for the Fire A pension plan would have been exhausted by 2026, according to estimates from Wyoming Retirement System actuaries.
Nine employers, including the City of Casper, are responsible for paying back a total of $20 million to the state over 20 years without interest under the new law. Casper’s overall obligation is estimated at $7,294,118, according to a memo from Casper Financial Services Director Jill Johnson.
The city isn’t looking to pay the entire amount all at once, but is instead asking the Casper City Council to approve depositing $4,956,472 into a sinking fund that would accrue interest and help the city pay back its total obligation over 20 years. The money to be deposited in the sinking fund would come out of unappropriated cash balances available in the city’s General Fund. The City Council will consider authorizing the deposit of this money into the sinking fund on Tuesday, May 17.
The new state law to help shore up the Fire A pension fund eliminated 3% annual compound cost of living adjustments (also known as COLAs) increasing the benefits of retired firefighters under the plan. Those adjustments had previously been in effect since 2004.
There were 255 retired firefighters, including 93 who had retired from the City of Casper, under the Fire A pension plan as of March 14, 2022, according to the memo from Johnson.
The pension plan, which was initially established in 1935, became known as Fire A in 1981 when it was restructured due to under-funding. The legislature directed about $46.8 million between 1981 and 1996 to shore up the account. In 1997, the legislature adopted an act ceasing contributions to the Fire A pension fund. That included halting the required 8% of salary contributions, the 21% of salary contributions from employers and the 50% of fire insurance premium tax contributions toward the pension fund. Had these contributions to the fund from employers and employees continued, approximately $33 million would have been directed to the account between April 1, 1997 and Dec. 31, 2020, according to the legislature’s findings section of Senate File 39.
An actuarial report dated Jan. 1, 2002 identified deteriorated funding position for the Fire A pension fund, but employer and employee contributions weren’t reinstated in response to that information, according to the legislature’s findings. A 2014 bill to reduce the COLA and reinstate employer and employee contributions did not pass.
Were the pension plan to have been shored up without reducing benefits, about $148.1 million in contributions would have been needed as of Jan. 1, 2022. Eliminating the 3% annual COLA would not have been enough alone to shore up the health of the Fire A pension fund. An additional 57% reduction to benefits would have been needed, according to the legislature’s findings.
Eliminating the 3% COLA and directing $75 million to the new Fire A Legislative Reserve Account are two of the actions the new law implemented to help ensure the Fire A plan remains solvent. That $75 million plus the 40% of annual fire insurance premium tax revenues will be invested in a diversified portfolio with an assumed rate of return of 7% annually, according to the Legislative Service Office. Expenditures out of the reserve account to pay for benefits aren’t expected to be needed until fiscal year 2026.
Funding out of the Fire A Legislative Reserve Account will be reverted to the state’s general fund when there are no longer any Fire A beneficiary obligations, which LSO says is estimated to occur in 2082.