Date Requested:March 21, 2005
Time Requested:01:50 PM
Agency: Consolidated Public Retirement Board
CBD Number: Version: Bill Number: Resolution Number:
2005R1553 Committee Sub SB514
CBD Subject: Justices & Judges Salaries
FUND(S)
JRS fund 2140; PERS fund 2510
Sources of Revenue
General Fund
Legislation creates:
Neither Program nor Fund

Fiscal Note Summary

Effect this measure will have on costs and revenues of state government.

    Actuarial Note Regarding Pension Legislation
    
    The Bill provides pay increases for justices of the Supreme Court of Appeals, judges of the Circuit Court and Family Court judges. Family Court judges are covered under PERS while all others are covered under JRS.
    
    Family Court judges would receive an increase from $62,500 to $93,500 annually. This exceeds the PERS salary scale estimates from their last increase by about 35.6%. As a result, PERS would incur an increase in UAAL above salary scale of about $800,000. The Normal Cost for current benefits would increase by about $37,000. Funding of the additional UAAL would require $65,000 in contributions over 30 years for a total annual cost increase in PERS of $102,000. This represents about 0.01% of PERS payroll. Current PERS benefits require 10.51% of payroll, which exceeds the current employer contribution rate of 10.50%. If adopted, the PERS contribution rate should be increased to provide the required additional funding.
    
    Supreme Court justices would receive an increase from $95,000 to $128,500 annually, an increase of 35.3%. Circuit Court judges would be increased from $90,000 to $121,000, or by 34.4%. Both of these increases exceed the current JRS salary scale expected increase of 23%, which includes inflation since their last increase in 1999. As a result, the UAAL in JRS would be increased by $8,626,000. This increases the JRS annual amortization payment by $1,075,000 per year through FY2018. The Normal Cost for current benefits would increase by $326,000. The total increase in the actuarially determined contribution for FY2007 would be $1,401,000. Since JRS contributions are actuarially determined, the annual appropriation for JRS would be increased to reflect the additional contributions required.
    
    This Actuarial Note provides a cost analysis for pension benefits under PERS and JRS resulting from the greater than expected percentage salary increases and the additional contributions required to fund those costs. These costs do not include the additional salary amounts nor other fringe benefit costs tied to payroll. Those cost are fully in addition to the pension costs reflected in this Actuarial Note.

Fiscal Note Detail
Over-all effect
Effect of Proposal Fiscal Year
2005
Increase/Decrease
(use"-")
2006
Increase/Decrease
(use"-")
Fiscal Year
(Upon Full
Implementation)
1. Estmated Total Cost 0 0 1,503,000
Personal Services 0 0 0
Current Expenses 0 0 0
Repairs and Alterations 0 0 0
Assets 0 0 0
Other 0 0 1,503,000
2. Estimated Total Revenues 0 0 0
3. Explanation of above estimates (including long-range effect):
    Pension benefits under PERS and JRS are based on salaries at or near retirement. The actuarial valuations for each plan include actuarial assumptions in regards to anticipated salary increases based on a combination of current economic conditions, past increases, and expected future experience.
    
    For PERS, the salary scale does not accumulate and experience is tracked year to year. Costs under PERS were calculated based on the salary increase in excess of the salary increases that were expected in total since the last salary increase. The increase in the bill far exceeds the expected increase since Family Court judges received an increase in 2003. For PERS, only active members are impacted by the salary increase and retirees from the Family Court are not entitled to Cost of Living increases. Pay increases for Magistrate Court judges are in line with PERS expected salary increases.
    
    The JRS assumption is reflective of the fact that increases historically occur every few years, and not annually. The assumption includes a catch up inflation amount in the current salary increase assumption. For JRS members, the salary increases in the bill are far in excess of the inflationary catch up percentage of about 23%, resulting in significant actuarial losses. The JRS costs represents the costs of the larger than expected increase. In JRS, the salary increase impacts not only active JRS members, but also provides comparable Cost of Living retirement benefit increases to all current retirees and beneficiaries base on the bench from which the member retired. Cost reflect both active member and retiree liability increases above expected.
    
    For both PERS and JRS, Normal Cost amounts for current benefits increase annually based on expected increasing payroll. Amortization payments are based on level dollar funding and remain level through 30 years for PERS and through FY2018 for JRS. As a result, the dollar amounts do increase each year, but decrease as a percentage of payroll.


Memorandum
Person submitting Fiscal Note:
Amy Langenbrunner
Email Address:
ALangenbrunner@wvadmin.gov
    None.