Burbank officials this week said plans by the state’s pension agency for public employees to increase employer contributions will sting in the short term, but “is a good thing” for the city’s long-term financial health.
The California Public Employees’ Retirement System, or CalPERS, last week approved new policies that will increase employer contributions in an effort to fully fund the system within 30 years. That means median contribution rates for public safety and miscellaneous plans could increase by 34% and 36%, respectively, over 10 years, according to CalPERS.
“It’s a good thing what CalPERS is doing, being able to address the lack of funding for the pension program,” said Burbank Financial Services Director Cindy Giraldo. But, she added, “it does equate to short-term pain for cities.”
Officials won’t know exactly how much pain will be incurred until November. But because the city has been fiscally conservative in the past, “I believe we’re going to fare much better than other cities,” Giraldo said.
The public pension giant administers retirement benefits for more than 1.6 million current and retired employees and their families.
Burbank’s employee plans, depending on the union, are between 75% and 82% funded, which is above the state average, Giraldo said.
As of last year, state and local agencies in the system were about 70% funded, according to CalPERS.
“The city of Burbank has always been conservative with its financial policies,” Giraldo said. Last year, the city’s pension tab reached $26.5 million.
Since the new method won’t kick in until 2015, “we do have time to progressively absorb the impact,” Giraldo said.
The city’s unfunded pension liability, or the shortfall when comparing the obligation to employees and retirees to the value of the city’s assets held with CalPERS, is $252 million.
Paying that down is important for the city’s fiscal stability, Giraldo said.
“You don’t want to burden the next generation with the cost of pensions that are being earned today,” she said.