AgdaPkt 2018-09-10 Joint SA PFA - Laserfiche WebLink

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6.1.C. - Page 50 increases in revenues they will seek, in response to rapidly increasing pension costs. Where projected pension costs are disclosed, they are often based on Ca1PERS projections for returns on investment that some experts argue are optimistic, and residents are not apprised of the potential for far greater costs should another recession occur, or other Ca1PERS assumptions prove inaccurate. The steps necessary to address the pension crisis are unpleasant to think about, much less implement. Indeed, some of the Cities have advised the Grand Jury that, while important, amortization of Unfunded Liabilities must be balanced against "other priorities" for new spending. 189 While the Grand Jury understands the desire on the part of the Cities to expand city services in these times of economic growth and increasing property tax revenues, it is difficult to think of a more important issue for the Cities to focus on than the looming pension crisis. Currently, the county enjoys good economic conditions. Its unemployment rate recently dropped to 2.1 percent. 190 Many of the Cities are experiencing rising revenues. 191 If the Cities do not address Unfunded Liabilities in a decisive way now, when will they ever be able to? The next recession may well reduce Ca1PERS' Returns on Investment below their projected level, resulting in even larger Unfunded Liabilities and higher pension costs. The next recession may also reduce or eliminate the Cities' budget surpluses, making it harder for them to cope. 192 Now is the time for the Cities to engage their residents in the issue and, with the residents' support, take the difficult actions necessary to secure a bright future for their communities. FINDINGS F1. Each City's CAFR for the fiscal years ending June 30, 2015, June 30, 2016 and June 30, 2017 reported covered payroll for the City's pension plans in the amount set forth beside its name for that year in Appendix A. F2. Each City's CAFR for the fiscal years ending June 30, 2015, June 30, 2016 and June 30, 2017 reported contribution payments to Ca1PERS on the City's pension plans in the amount set forth beside its name for that year in Appendix A. F3. Each City's CAFR for the fiscal years ending June 30, 2015, June 30, 2016 and June 30, 2017 reported Unfunded Liabilities (as defined in this report) for the City's pension plans in the amount set forth beside its name for that year in Appendix A. Each City has been required to make large Amortization Cost (as defined in this report) payments of principal and interest to Ca1PERS on those Unfunded Liabilities. These payments have diverted money that could otherwise have been used to provide public services or to add to reserves. 189 Interviews by Grand Jury. 190 Glover, Mark, California sets a new record for lowest unemployment rate, The Sacramento Bee, January 19, 2018, <www.sacbee.com/news/business/article/195571634.html>. 191 See footnote 125 above. 192 Redwood City notes that the current expansion phase of the economy has now lasted for eight years, and that, historically, expansionary cycles only last an average of five years. It cautions that the economy is in a "late stage of expansion" and that prudent long-term budgeting requires the city to "proactively prepare for future recessionary impacts that loom in the future." Redwood City, Report - FY2017-18 Mid -Year Budget Study Session, p. 11. 2017-2018 San Mateo County Civil Grand Jury 36