Over the next few months, the San Luis Obispo City Council will be faced with making a decision about how best to cut $8.9 million from its budget over the next three years due to pension-related shortfall projections.
And that’s on top of costs that are projected to escalate in future years if the city doesn’t pay down its obligations sooner rather than later.
The public suggestions from the survey will be presented to the City Council at its Dec. 12 meeting.
$8.9 million amount the city is looking to cut from its budget over the next three years
City leaders are looking at cutting $7.5 million from the general fund and about $1.4 million from funds that include water, wastewater, transit and parking. Rate increases for water and sewer are not being considered to help pay for the pension costs.
The city is considering four main ways to address the shortfall: operational reductions, increased employee contributions into retirement funds, new ways of doing business, and revenue options that could potentially increase income.
The city’s two questions are: What feedback do you have about the potential components of the Fiscal Health Response Plan, and what ideas do you have for workable solutions to address the problem?
A variety of factors have contributed to the problem, including losses from the recession, more conservative investment assumptions and increasing city costs to cover pension payments.
California Public Employees’ Retirement System (CalPERS) announced in December that it would lower its expected average rate of return on pension investments from 7.5 percent to 7 percent over a three-year period.
$19 million pension costs the city will have in 2024-25
For San Luis Obispo, annual costs for CalPERS will more than double in 10 years, from $7.8 million in 2014-15 to $19 million in 2024-25.
The city’s unfunded liability, the difference between the estimated cost to pay retirement obligations and the market value of the city’s assets currently set aside to fund them, is more than $140 million.
On Dec. 12, City Council members will give feedback on the components of the Fiscal Health Response Plan, which will be considered for adoption in April 2018. The plan will help guide the city’s 2018-19 Supplemental Budget, to be adopted in June 2018.