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6.1.C. - Page 30 • As Unfunded Liabilities increase, cities' municipal bond ratings may be hurt, which could increase the cost of other public improvement projects that require bonds. • Public employees may face reduced compensation, reduced COLAs, or layoffs. • Retired employees may find the security of their pensions threatened (obligations "guaranteed" by the state constitution have been voided in situations of bankruptcy) 73 • Residents may be asked to raise taxes; a difficult "sell" in the present political climate when the reason is to pay for legacy pension costs and not current services.74 The Cities' Pension Costs and Unfunded Liabilities Today. Appendix A shows each City's pension costs, Funded Percentage and Unfunded Liabilities for FY 2016-2017 (the most recent year for which information is available), together with a comparison to each of the two immediately preceding fiscal years. A review of Appendix A data on a consolidated basis (shown at the bottom of Appendix A) is also revealing. A discussion of that consolidated data for the Cities follows. Unfunded Liabilities and Funded Percentaiies of the Cities. Two important measures of the health of pension plans are the size of their Unfunded Liabilities and their Funded Percentages. Table No. 1 (below) shows, based on the 7.5 percent Discount Rate then being used by Ca1PERS, that the Cities' aggregate Unfunded Liabilities increased by 10.7 percent from FY 2014-2015 to FY 2015-2016 and by another 22.2 percent from FY 2015- 2016 to FY 2016-2017. Funded Percentages correspondingly decreased, at an accelerating rate, over these 3 years. Table No. 1 - Increasing Unfunded Liabilities and Decreasing Funded Percentages ($000) Unfunded Liabilities Percent Increase in Unfunded Liabilities Funded Percentage 2016-2017 $1,215,465 22.2% 70.5% 2015-2016 $994,535 10.7% 75.1% 2014-2015 $898,036 76.8% (See, Appendix A.) As noted previously, among private sector pension plans, a Funded Percentage of 80 percent is the threshold below which a plan's solvency is considered "at risk".75 Table No. 1 shows that the Funded Percentage for the Cities' pension plans, while slightly higher than Ca1PERS' system- wide Funded Percentage of 68 percent, has dropped to 70.5 percent, almost 10 percentage points below this 80 percent "at risk" threshold. The Funded Percentages in Table No. 1 would be significantly lower, and the Unfunded Liabilities correspondingly higher, if a lower Discount Rate were applied. This difference is shown in Table No. 2, below. 73 Ang, Kimberly, What Happens to Public Employee Retirement Benefits When Municipalities Go Bankrupt?, United States Common Sense, March 10, 2016, p. 3, <httD://2ovrank.ora/research/researchText/45>. 74 Interviews by Grand Jury. 75 Nation, Pension Math 2011, p. 17. 2017-2018 San Mateo County Civil Grand Jury 16