Citing limited options for raising local taxes, the association representing hundreds of California cities warned that rising public employee pension costs might mean fewer services and longer emergency response times over the next several years.
“These pressures are not only mounting, but will force cities to make very tough choices in the next seven years and beyond,” said Carolyn Coleman, executive director of the League of California Cities.
The organization Thursday released a new analysis showing that 16% of the general fund budget in an average large city will go toward pension payments in just seven years’ time — close to double the percentage paid for those retirement stipends as of mid-2007.
Most cities have pension benefits managed by the California Public Employees’ Retirement System, or CalPERS. Returns on CalPERS’ $346-billion portfolio haven’t met long-term expectations over recent years. As of the summer of 2016, the system was projected to have assets to cover only 68% of its future obligations.
Local officials generally must increase their contribution to worker pensions if CalPERS investment returns shrink. The new analysis projects an average increase of more than 50% in the annual pension payments made by the state’s largest cities over the next seven years. The association found in a survey that most of the communities with police and fire employees expect to soon pay 54 cents in pensions for every dollar in salary. In some cities, those payments are expected to rise to 76 cents per dollar of salary.
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