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6.1.C. - Page 31 Increase in Unfunded Liabilities and Decrease in Funded Percentages if a Lower Discount Rate is Used. The Cities' Unfunded Liabilities and Funded Percentages in Table No. 1 were calculated using CaIPERS then -applicable Discount Rate of 7.5 percent. If, however, the Discount Rate had been just one percentage point lower, the Cities' Unfunded Liabilities for FY 2016-2017 would have been approximately 44 percent larger (as shown in Table No. 2) and the corresponding Funded Percentage that year would have been 62.4 percent rather than 70.5 percent, almost 18 percentage points below the 80 percent Funded Percentage standard. Table No. 2 - Increased Pension Unfunded Liabilities and Decreased Funded Percentages if Discount Rate is Reduced By 1 percentage point ($000) Fiscal Year Unfunded Liabilities based Unfunded Liabilities based Funded Percentages based Funded Percentages based on on 7.5 % Discount Rate on 6.5 % Discount Rate on 7.5 % Discount Rates 6.5 % Discount Rates 2016-2017 $1,215,465 $1,755,047 70.5% 62.4% 2015-2016 $994,535 $1,515,521 75.1% 66.5% 2014-2015 $898,036 $1,399,702 76.8% 68.0% (See, Appendix A.) Applying its new Discount Rate of 7 percent (which will be implemented in stages over the three fiscal years ending FY 2020-2021), CaIPERS states that its current, system -wide Funded Percentage is 68 percent .76 However, if long-term Returns on Investment decrease, or are projected to decrease, below 7 percent, then Ca1PERS' Funded Percentage (and corresponding Discount Rate) would drop even lower. For example, at a Discount Rate of 6.2 percent, it has been estimated that CalPERS' Funded Percentage would drop by almost 10 percentage points, from 68 to 58.3 percent.77 Increasiniz Pension Contribution Pavments. Increasing Unfunded Liabilities result in larger contribution payment costs. Table No. 3 shows how the Cities' contribution costs have risen from FY 2014-2015 through FY 2016-2017 and how the percentages of cities' payroll and general fund spending consumed by contribution payments have been increasing. 76 Terando, Strategies for Managing the New Reality, slide 8. Ca1PERS 2017 CAFR, p. 27. League of California Cities, 2018 Retirement System Sustainability Study, p. 1. 77 Nation, 2011 Pension Math, p. vii. 2017-2018 San Mateo County Civil Grand Jury 17 Table No. 3 - Increasing Pension Contribution Payments ($000) Fiscal Year Total Contribution Contributions as a percent Contributions as a percent Payments of covered payroll of general fund spending 2016-2017 $104,986 27.3% 13.6% 2015-2016 $95,987 27.4% 13.2% 2014-2015 $85,335 25.5% 12.8% (See, Appendix A.) 76 Terando, Strategies for Managing the New Reality, slide 8. Ca1PERS 2017 CAFR, p. 27. League of California Cities, 2018 Retirement System Sustainability Study, p. 1. 77 Nation, 2011 Pension Math, p. vii. 2017-2018 San Mateo County Civil Grand Jury 17