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8.A. - Page 22 of 42 Expenditure Projections Rising employee -related costs, due primarily to escalating payments to fully fund benefits for already retired employees, are the most significant contributor to rising expenditures. The Preliminary Ten -Year Forecast does not include increases to ongoing staff. This section provides information about the City's status and strategy for addressing pension costs and other employee -related costs. Pension Liabilities As shown below, pension benefits are funded by a combination of employer contributions, employee contributions, and investment earnings on those contributions. Based on data over the past 20 years ending June 30, 2020, for every dollar CalPERS pays in pensions: • 55 cents comes from investment earnings • 32 cents from employer contributions • 13 cents from employee contributions Essentially, 68 cents out of every public employee pension dollar is funded by CaIPERS' investment earnings and employee contributions, with employers making up the difference. In the fiscal year ended June 2019, CAPERS paid out nearly $25.8 billion in pension benefits. T I I UTN"I 'I 1)) T-'1g1B; When there is a gap between the assets available to fund benefits, and the assets needed to fund benefits, the City must make up the difference. Currently, about 18 percent of the City's General Fund goes towards paying for pension benefits; this amount will grow to 20 percent over the next five years, as required City pension contributions ramp up to fully fund benefits for already -retired, as well as current employees. The City's most recent actuarial report from the California Public Employees' Retirement System (CaIPERS) indicates that the City has an unfunded pension liability of $274.3 million as of June 30, 2019, up from $264.5 million a year prior, an increase of 3.7 percent. Additionally, the City has a retiree health liability of $49.5 million. The City's total unfunded pension and retiree health liability is $323.8 million, up from $314.0 million a year prior, an increase of 3.1 percent. The City's overall funded status for its pension plans is 65.0 percent, up slightly from 64.7 percent the prior fiscal year. A majority of the increase in the City's unfunded pension liability is due to the lowering of the CAPERS assumed rate of investment return (otherwise known as the discount rate) to 7.0 percent in FY 2018-19. Page 22 of 28 City of Redwood City 1017 Middlefield Road, Redwood City, CA. 94063 Tel: 650-780-7000 www.redwoodcity.org 553