S&P Global Ratings on Thursday downgraded the rating on Fort Worth's general obligation debt to AA from AA+ , citing the city's rising pension liabilities and pension contributions below actuarially determined levels.
The ratings agency noted in its report that the $2.3 billion Fort Worth (Texas) Employees' Retirement Fund was 42.4% funded as of Sept. 30 with unfunded pension liabilities of $3.1 billion.
S&P Global Ratings added that while it expects an existing city pension task force to make recommendations soon to improve the pension plan's funded status, nothing yet has been adopted. And while increased pension contributions have been budgeted for fiscal years 2018 and 2019 (a 2% increase over the next two years), contributions are still expected to fall short of the actuarially required levels and unfunded liabilities are expected to rise, the ratings agency said.
If the Texas city cannot enact pension reform or the adopted changes do not fully address rising unfunded liabilities, further ratings action could be taken, S&P Global Ratings said.
According to the ratings report, the city's required pension contributions represented 11% of total government expenditures in 2017. The city contributed 80% of its actuarially determined contribution levels in 2017.