Has SLO gotten a grip on its pension problem?

November 4, 2014

moneyBy JOSH FRIEDMAN

Ahead of Tuesday’s vote on San Luis Obispo’s half-cent sales tax, state pension reports have emerged indicating that the city’s unfunded liabilities have decreased slightly, but its annual retirement costs will likely rise by several million dollars over the next decade.

San Luis Obispo has more than $115 million in unfunded pension liabilities, as of June 30, according to reports released last month by the California Public Employees Retirement System (CalPERS). The city has accrued more than $300 million in pension costs, and the value of the assets in its plans is less than $200 million.

But, during the 2012-2013 fiscal year, San Luis Obispo’s total unfunded liabilities dropped by about $7 million. The decrease in pension debt can largely be attributed to a spike in CalPERS investment returns, which jumped from .1 percent in 2011-2012 to 13.2 percent in 2012-2013.

Still, the drop in unfunded liabilities prompted city management to issue a city council memorandum heralding the latest CalPERS reports as good news.

“This is positive news in light of the action taken to assertively address these liabilities over the past year,” city finance director Padilla wrote in the memo. City Manager Katie Lichtig then forwarded it to the council.

Earlier this year, the council set aside $935,000 to contribute to CalPERS in order to help pay down the city’s liabilities.

Nevertheless, the city currently spends more than $10 million a year just to make its minimum payment on the pension plans, an amount that could soon spike.

CalPERS has planned a five-year rate hike beginning in 2015-2016 in order to narrow the funding gaps in pension plans. By the end of the rate hike in 2020-2021, San Luis Obispo will owe CalPERS approximately $14.3 million for its minimum payment, according to the rate projections in the most recent reports.

However, if the city’s payroll increases, so will its pension costs. Annual sums owed to CalPERS are calculated as a percentage of payroll costs.

City management is currently in negotiations with its employees’ unions over new bargaining agreements. Worker pay is expected to rise as a result of the negotiations because the council has already signed off on a study indicating that San Luis Obispo employees are, by in large, underpaid.

If city staffers indeed receive pay increases, San Luis Obispo’s annual pension costs could eclipse $15 million during the current decade.

In comparison, the city owed CalPERS $8.4 million just three years ago. However, for several fiscal years beginning in 1999 the city chose to forego payments.

But, in the decade that followed San Luis Obispo foregoing payments, the city accumulated more than $100 million in unfunded liabilities. As the liabilities have increased, so have the minimum payments to CalPERS.

For the past eight years, though, the city has had its own sales tax revenue to lessen the burden.
Since 2006, the passage of a half-cent sales tax has generated about $7 million annually.

But, the tax expires on March 31, 2015. Measure G, a new half-cent sale tax slated to last eight years, is on Tuesday’s ballot.

If the tax fails, city staff has offered the council several options to cut spending enough to balance the budget.


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11 Comments

  1. Rambunctious says:

    All of these governing bodies from the cities to the schools to Sacramento to Washington DC need more money. Not for the betterment of the people…they need more money to keep the outrageously obscene retirement promises they made to the public sector employees. VOTE NO MORE as in I ain’t got no more.

    (8) 16 Total Votes - 12 up - 4 down
  2. shelworth says:

    Didn’t read the article, but let me guess; raise taxes?

    (10) 16 Total Votes - 13 up - 3 down
  3. MBCA says:

    What is amazing is how poorly SLO compares to other Town’s and Cities in California. Take a look at other similar Towns and other Cities and their unfunded pension liabilities areway lower then ours. In addition, the % of our employee salaries and benefits to our total budget is tremendously higher than other similar Cities and Towns in California. While other Cities and Towns have made tremendous strides since the Bell fiasco to reduce employee costs, SLO has increased its cost and liability.

    (24) 30 Total Votes - 27 up - 3 down
  4. DennySLO says:

    Quoting the last sentence from the above story;

    “If the tax fails, city staff has offered the council several options to cut spending enough to balance the budget”.

    NO on “G” or any other tax, assessment or fee imposed by those who cannot budget soundly and fiscally with money that doesn’t belong to them!

    Tell me this, if the staff has offered ways to cut spending and balance the budget, why are they not doing this already? Because, the city wants the money cow (the taxpayer) to keep producing so pet projects and political clout can provide personal gains to those in power. The downtown association and new developers are so in the pockets of the Marx, Christianson and assbag it’s pathetic.
    Just wait until after the election, the LUCE will be brought back to the table and the council will overrule the airports findings and the city will once again be in litigation because of the overpaid, out of touch looser city attorney.

    (21) 27 Total Votes - 24 up - 3 down
  5. Pelican1 says:

    Perhaps an alternative would be to reduce the work force and increase efficiency. Of course that would mean only 3 guys could lean on shovels while watching the 1 guy dig the hole…but it’s a start. The city could also invest in rubber handled shovels that bend when leaned upon.

    (23) 31 Total Votes - 27 up - 4 down
    • tomsquawk says:

      i just laughed out loud. i have personally witnessed this in quite a few countries in which i have lived and worked. we can also discuss “mechanical closets” which are great for naps after beer & pool at the Thirsty Isle. thanks for making my day

      (8) 14 Total Votes - 11 up - 3 down
    • unlisted says:

      But, with rubber shovels, they’d be even less productive?

      (-1) 1 Total Votes - 0 up - 1 down
  6. DennySLO says:

    More reasons to say NO to measure “G”.

    SLO city council, STOP THE GREED!
    Keep your hands OUT of my WALLET and focus on fiscal accountability PERIOD.

    (27) 37 Total Votes - 32 up - 5 down
  7. falconbh says:

    We all need to be concerned with our Unfunded Pension Liabilities, early retirements at 90% , lifetime benefits, and out of control salaries.

    They are ” All” driving these New Tax Increases, for cities and districts.

    Until we address these “Structural Budget Problems” we will continue to see more New Tax Increases, More New Fees, More unfair Automatic Water Rate Increases.

    We need to balance our budgets with “Growing” already Increasing Tax And Rate Increases.

    The budgets need to reflect a balance between salaries, benefits, early pensions and the cost of public infrastructure, streets, buildings, etc.

    When you have budgets at 80% to 90 % in Salaries, Benefits, and Pensions we have budgets that are not balanced.

    Cities and Districts need to get back to basics on what we can Afford. Salary Studies are nice information, but what can we afford is the More Important Question !

    All These New Sales Tax Increases, in Pismo Beach, SLO, Atascadero, The Double Taxation Grover Beach 45 Year Road Tax, and Overzealous New Building Taxes,
    Will Not Solve This Structural Budget Problems !

    Be Independent
    Be Strong
    Be Free

    Vote #

    (20) 26 Total Votes - 23 up - 3 down
    • catdude says:

      Without comment on your content, I would ask that you learn correct English
      and Stop Capitalizing Every Other Word; it is poor English and Makes It Hard to Read Your Comments… Oh, I know, I’ll just refrain from reading your comments…

      Flame suit on!

      (3) 23 Total Votes - 13 up - 10 down
  8. Mr. Holly says:

    “If the tax fails, city staff has offered the council several options to cut spending enough to balance the budget”.
    Tax or no tax wouldn’t it be a new concept to cut spending and possibly create a surplus and quit ripping the taxpayers off?

    (26) 32 Total Votes - 29 up - 3 down

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