IMRF Employer Rates Likely to Increase Dramatically

As you get into your budgets, appropriations and levy ordinance cycle for the upcoming fiscal years, please be aware that if you participate in IMRF and your employer rates are increasing, make sure that you increase your budgets and corresponding appropriations and levies accordingly.

IMRF rates for calendar year 2009 were finalized and announced in November 2008. However, due to the severe market declines during 2008, IMRF investments lost close to 25% of value. Since the IMRF is a defined benefit pension plan, there are three sources of funding: members (your employees), employers (your library) and investment income/returns. Member contributions are capped, by law, at 4.5%. Investment income in 2008 was negative. To keep the plan funded properly, then, the only other funding source becomes the employer.

For calendar year 2010, under current IMRF employer rate setting guidelines, the average increase in rates would be 79%. So, if your current IMRF employer rate is 10%, that average increase would raise your rate to 17.9%. However, each employer’s account is different, so your rate increase could be different as well.

The IMRF, at its February 27, 2009 board meeting, hopes to adopt some changes that would help alleviate the impact of the rate increases on the employers.

Important communications from IMRF to look for in the next few months:

February 2009 – employer reserve statements for the year ending December 2008

March 2009 – preliminary phase-in rate notices

April 2009 – preliminary rate notices

April 2009 – GASB disclosures (save this for your auditors!)

Compounded Earnings

The best way to provide for your retirement is to save regularly. In addition, the earlier you start (read as NOW!) the better of you’ll be.

Let’s look at an example of two different savers – both are going to invest $250 per month, and both will average 5% annual returns on these investments.

Saver # 1 starts saving $250 per month, starting at age 20 and stops saving at age 30. Over this span, this saver invests $30,000 of their own money. If they leave the investment alone, it will be worth $224,000 when they turn 65.

Saver # 2 starts saving $250 per month, starting at age 40 and continues until they reach age 65. Over this span, this saver invests $75,000 of their own money. If they leave the investment alone, it will be worth $150,000 when they turn 65.

Saver # 1 clearly has an advantage – saving LESS of their own money yet ending up with a larger overall investment. This is due to compounding, or letting your investments work for you over time. Saver # 1’s money was invested longer, and the earnings on those investments also had earnings (this is compounding).

So, if you can, work your way to saving regularly – it will go a long way towards helping fund your retirement.

Public Library Tax Funds

There are many different expenses for running a public library. A majority of funding used to pay for these expenses comes from property tax revenues. Did you know, however, that in Illinois there are various special funds you can create for certain expenses?

Here are some of the special funds you can create:

• Audit fund – this fund pays only for the library’s annual audit expenses.
• IMRF (Illinois Municipal Retirement Fund) fund – this fund pays only for the library’s IMRF expenses. With recent news about IMRF employer rates increasing in calendar year 2010, this would be a good fund to start if you don’t already use it.
• Medicare/Social Security fund – this fund pays only for the library’s payroll taxes related to Medicare & Social Security.
• Building/Maintenance fund – this fund is only for the library’s building(s) and upkeep, and can be used for (1) purchase of sites & buildings, (2) construction and equipment of buildings, (3) rental of buildings for library purposes, and (4) maintenance, repair and alterations of buildings and equipment.
• Insurance fund – this fund pays only for the building, liability and errors & omission insurance. It does not pay for health insurance costs. It can also cover risk management and self-insured expenses.

Levying for these funds is outside of your general fund, so if paying for any expenses listed above out of your general fund, you should consider creating and levying for the above special funds, freeing up dollars for general library purposes.

Every Little Bit Helps

Today’s entry: some quick tips from a bunch of different articles all saying the same thing – every little bit helps! Little sacrifices can go a long way.

For example:

Hitting the drive through for a hot coffee or latte can cost $3 to $5. If you do this every day, it can add up. Spending five dollars a day multiplied by twenty working days a month leads to $100 for one month, $1200 for the year. Cutting back even one day per week can save you $240. Bringing your lunch to work rather than hitting the drive-thru every day can yield similar results.

Movie tickets and snacks & drinks for two can cost $20 or more. Go to the movies once a week, and you’re spending over $1000 per year. Suggestions include renting a movie – its much cheaper. Alternatively, check movies out from the library – that’s free!

Sometimes when we’re facing tough financial times, we need to discern between our wants and our needs. I need food – but do I need to eat out? I want (for some, need) caffeine – but do I need the fancy $5 latte or can I settle for the cup of coffee that costs a dime in the break room? I need a car to get to work – but do I need the latest model with heated leather seats and a GPS? It’s OK to indulge, but in moderation and only when you can afford it.

WebJunction Discussion Group: Tough Times

Because I am getting busy with some year-end financial items for ALS, I’m going to “punt” today and share a link to a group in WebJunction called “Tough Times”.

The group can be found here: http://www.webjunction.org/toughtimes/articles/content/30406184

This piece of WebJunction offers courses, webinars, webinar archives, and documents and discussions on various topics to help you get your library through tough economic times. Topics include:

· Funding and Tight Budgets
· Demonstrating Impact
· Meeting Patron Needs
· Planning & Partnerships for Change
· Staff Training & Development

This is a great resource and one that I can’t give much justice to in 250 words or less – so go to the site and explore!

Surviving Uncertain Economic Times

Here are some suggestions from an article titled “Surviving Uncertain Economic Times” in the January 2009 issue of Columbia magazine, by John Ingrisano.

Reduce Your Expenses – suggestions include reexamining your budget, cutting back on unnecessary expenses, and revising your attitude toward spending. Ask yourself when making a purchase – Do I want this or need this? Examine your needs to truly see if they are needs.

Reduce Your Debt – if you carry credit card balances, try to reduce the balances on these each month. If you are in a bind –at least make the minimum payments, and make them on time! Late or missed payments will adversely affect your credit history and credit score.

Secure Your Job – you don’t have much control over whether your employer keeps you, but one way you to tip the scales in your favor is to make yourself indispensible. Look for ways to emphasize your unique skills and your value in the eyes of your employer.

Preserve Your Future (Retirement) Assets – in difficult financial times, it is tempting to cash out an IRA or 401(k), but you avoid making withdrawals from these long-term assets unless absolutely necessary. If you don’t meet certain conditions, you could also pay early withdrawal penalties and income taxes on these withdrawals.

In summary, protect what you have worked to achieve while reducing your expenses. The economy goes in cycles – maintaining financial self discipline during these tough times will help you get ahead when the economy rebounds.