CalPERS move leaves SLO with multi-million dollar shortfalls

March 1, 2017

Following the California Public Employee Retirement System’s (CalPERS) recent decision to lower its investment forecasts, the city of San Luis Obispo is facing skyrocketing pensions costs. As result, also because of slowing tax revenue growth, the city is facing a structural deficit, which includes a projected budget shortfall of more than $5 million in 2021-2022.

By that time, San Luis Obispo will likely be paying about $20 million a year for pension costs, nearly double what the city is currently contributing to CalPERS.

Last December, the CalPERS Board of Administration voted to lower the pension system’s discount rate from 7.5 percent to 7.0 percent over a three-year span. The changes will begin taking effect for San Luis Obispo in 2018-2019. The same year, the city is projected to start having budget shortfalls, according to SLO’s recently released five-year fiscal forecast.

When CalPERS lowers its discount rate, member agencies’ pension payments and unfunded liabilities increase due to the projected decrease in investment revenue. City estimates suggest the .5 percent decrease in the discount rate will result in about an $11.5 million increase in SLO’s unfunded liabilities.

As of June 2015, San Luis Obispo had $126 million in unfunded liabilities, which was more than the rest of the cities in SLO County combined.

Due to a CalPERS policy that agencies must pay down their unfunded liabilities over a 30-year period, San Luis Obispo was already faced with rising pension costs prior to the December decision to lower the discount rate. The yearly increases in the city’s CalPERS payments will now be compounded by the decision to lower the investment forecast.

The lowering of the discount rate alone will cause SLO’s CalPERS payment to rise by $3.2 million by 2021-2022 and by about $5 million by 2025, according to city projections. In all, the city’s annual pension payment is projected to rise by $8.3 million by 2021-2022.

SLO’s most recent actuarial report projected the city would owe CalPERS around $11.7 million in the current fiscal year. Thus, the city’s annual pension payment will grow to about $20 million by 2021-2022. The yearly pension payment is on pace to be well above $20 million by 2025.

In the years 1999-2000 through 2001-2002, San Luis Obispo paid CalPERS $0 annually.  At the time, the city had no unfunded pension liabilities, meaning the money in its retirement plans exceeded the amount of benefits owed.

By the end of 2011, SLO had accumulated $107.3 million in unfunded liabilities. In 2011-2012, the city paid CalPERS a total of $8.4 million.

As pension costs have shot up, so has city’s budget expenditures. In 2002, SLO’s general fund budget was approximately $35 million. General fund expenditures, the majority of which are staffing costs, are projected to rise to approximately $85 million by 2022, according to the five-year forecast.

However, the city’s revenue is not projected to keep pace with its expenditures. Growth in revenue from sales tax and from transient occupancy tax is slowing, which has forced the city to lower its revenue projections.

The spiking pensions costs combined with the slowing tax revenue growth has left the city with a projected shortfall of $2.7 million in 2018-2019. Current projections show the city will have a shortfall of $5 to $6 million in 2021-2022.

SLO general fund growth

In turn, the city has activated its “Fiscal Health Contingency Plan.” The plan includes limiting the hiring to essential personnel and restricting the city-funded travel and training that is afforded to employees. Likewise, the plan calls for deferring or dropping some capital improvement projects and other one-time projects.

The contingency plan does not call for staffing reductions, nor salary cuts.

Unlike most other cities in San Luis Obispo County, SLO has grown its staff over the last decade. A recent CalCoastNews report revealed SLO added nearly 50 full-time employees between 2006 and 2016. City employees also received pay increases.

While the city implements its fiscal contingency plan, staff will work on a long-term plan intended to balance the budget. It is unclear if the long-term plan will include cuts to staffing costs, but City Manager Katie Lichtig issued a statement saying all options will be considered.

“The five-year forecast shows that we have both near-term impacts and a long-term structural problem. That requires us to look at all options to achieve a structurally balanced budget, which will happen over the next year,” Lichtig said. “All measures will need to be carefully weighed against service impacts to make sure we continue our commitment of high quality service to the community.”

City staffers plan to present a fiscal action plan at the April 18 SLO City Council meeting.

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Hold the phone!

How are we going to keep attracting the best and brightest if we can’t increase salaries by an ungodly amount each time we have to replace someone?

And don’t we all wish our pensions were guaranteed by the taxpayers?

“The five-year forecast shows that we have both near-term impacts and a long-term structural problem.” Brilliant, just brilliant. Cutting travel? Haha…yeah, that’s not going to cut it Lichtig, it’s going to have to hurt a lot more than that.

Obviously the self proclaimed best and brightest have failed us miserably.

Actually someone is never “replaced”, when they retire they continue to receive a 100% salary and often more than 100%, then the city has to hire another person and it often is at near the same of even higher salary that the previous person, so you have actually doubled your costs in a way. What our”best and brightest” will do is kick this down the road and try to get theirs before the pyramid collapses.

Here is an easy way to save $500,000, fire Lichtig for cause, but then again the voters of SLO keep putting in people afraid of Lichtig.

This budget shortfall is a joke, and can be easily corrected by one simple action: Lichtig, stop hiring consultants to do the work your employees should, and could, be doing.

Since Lichtig’s arrival in town, city staff no longer do any actual work. They just supervise the consultants she hires to do EVERYTHING. Submit plans for a building permit? A consultant evaluates them. Revise a city plan? An out of town consultant is hired to do the work — and screw over residents in the process. (She spent more than $1 million for consultants to “revise” the general plan a couple of years ago — and its arguably the worse general plan we’ve ever had.) Hold a public meeting? Hire a consultant to run it. She’s spent million$$$ on this nonsense. And it goes on and on and the city council cluelessly allows it to continue.

Oh, and then there was the $5 million she spent last year on new software to run the city ship more expensively than ever before.

Fire Lichtig, get rid of consultants, make city employees do their jobs instead of supervising outsiders, and that budget shortfall will disappear.

Who could have possibly thought that anything else than this would happen? Just another sign of the absolute and total incompetence of those elected to serve the ‘people’. But, in reality they are serving no one, except themselves.

Just like Nero (who fiddled while Rome burned), the SLO grand potentates have large parties making fun of other people, knowing full-well they will not be held accountable.

Can anyone present a reasonable, logical reason that the City Manager gets paid what she

gets? More than the President. Just imagine what her CALPERS salary will be – and who

will be held liable for it. Would a 20% cut in her salary hurt her or would it show that she

really cares? Would it set an example for others?

So, citizens of SLO – get out your pocketbook or checkbook and get prepared to pay up.

While your own retirement account suffers, just take solace in the fact that more of your hard-earned money will be going to lavishly support retired city officials.

And while this particular story is about SLO, it is directly applicable to other cities in this county. Paso Robles also has a huge, currently un-funded, obligation to its city retirees.

And like SLO, Paso will find a way to get more money from their citizens to continue this insane process.

I could not help but smile when reading the comment from “info”. Don’t tell your children to get a good education, a good paying job and work hard. Just encourage them to get hired by some city, mind their P’s and Q’s for 20 to 25 years then retire and live comfortably for the rest of their lives – even have another career. How can you beat that?

The state is next… can only survive with blinders on for so long before it bites one in the ass. Stop voting for freebies and giveaways. Be responsible in the booth and stop trying to retire on the backs of others.

Time to drastically cut the pensions. Just like raising the age of social security benefits, the same sobs do to us. I hate government employees. They can’t all rot in hell.

Show me any Demo run city,county,state or national government and I will show you a government doomed to fail.Take from the little man/woman and give to the ones feeding at the public hog trougth.

Before the Fiscal Health:

San Luis Obispo County Pension – 2.0% at 55

Caltrans District 5 Pension – 2.0% at 55


City of SLO or Emergency Positions 3.0% at 50…..Damn my guidance counselor!

You should know that City Manager Ken Hampian and finance director Bill Statler persuaded the city council to go to that obscene 2.7% formula, telling them the city had the funds, then once their own pensions were raised accordingly, they retired at rather young ages considering when most people retire, so they could do “consulting.” Hampian’s pension is $168,000 and Statler’s $155,000 — both far larger than they would have been without the boost that’s causing all the problems with the city’s financing their inflated pensions. This is really crooked. Yet these guys are regarded as great citizens. Go figure.

They have done this to themselves while only caring about themselves with all of the their high salaries, benefits and retirement benefits. Unfortunately, we the taxpayers will be burdened by their actions. Prepare yourself for the catch all actions that government will take to keep their littlle game going for their personal gain. Mores taxes, fees, and probably bonds. It may be too late though. It’s time that not only San Luis Obispo City but all of the other local cities have citizens oversight groups to actually see what has happened. I’m not talking about yes people appointed to these committees but qualified people who know how to find and identify the abuses that have taken place and to identify the guilty ones for letting this happen.

Blame the voters. It is about time voters started acting and thinking like adults and end this nonsense.

Sorry to all those who got accustomed to personal gains through time served, but that is not how anything anywhere works. At least not for long, it does not.

The piper has been playing the tune, it’s now time they pay. First step: end the stupidity and do not propagate the foolishness; next step: end the bloated “earned” retirement for those who did nothing but exist to earn it.

Want a nice baseline? Start by MATCHING 30-year military pension rates for ALL public servants currently, and about to be, retired. Problem solved.

The Happiest City in the Country…..

“As of June 2015, San Luis Obispo had $126 million in unfunded liabilities, which was more than the rest of the cities in SLO County combined.”

Is about to pay the piper for the Greedy Government Hacks that made Enron and AIG look like saints.

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