Glendale officials warned this week that planned changes to how the state’s pension agency calculates contribution rates will have a significant impact on a city still recovering from a prolonged recession.
The California Public Employees’ Retirement System this week approved a proposal to increase how much cities pay for their benefit plans starting in 2015. The plan is part of an effort to fully fund the system in 30 years.
Median contribution rates for public safety and miscellaneous personnel could jump by 34% and 36%, respectively, over 10 years, according to CalPERS. Without the accounting change, rates would have still increased over time, but not as sharply.
Glendale officials won’t know exactly how the change will impact the city’s contribution rates until a CalPERS actuary crunches the numbers. Amy Norris, a spokeswoman for the agency, said contributors should receive their new rates in October or November.
Still, Finance Director Bob Elliot said in an interview that the coming change “is obviously a big deal.”
The impact, he added, could mean more being set aside for pension payments from the General Fund, which pays for parks, libraries and other public services.
City spokesman Tom Lorenz said even a single-digit increase would put pressure on the city’s pocketbook, which is already slimmer than officials would like.
“Every dollar makes a difference,” he said.
The city’s bottom line has been impacted by several state and federal funding cuts recently. But after years of yawning budget gaps into the tens of millions, city officials expect a balanced budget for next fiscal year. That feat, though, may be dashed in coming years because of the rising pension costs.
“From redevelopment to … the prisons being realigned, to no money for the jails, to taking away the grants, it just seems like an evil cycle,” Lorenz said.
CalPERS officials approved the changes in order to “enhance the long-term sustainability of the fund,” according to a staff report.
Last year, Glendale’s annual pension cost was $30.6 million. Depending on which union an employee belongs to, between 8.5% to 12.5% of their paycheck goes toward retirement benefits.
Elliot said he doesn’t know if the pension changes will be discussed during upcoming budget study sessions, but when officials do start analyzing the impacts, they may have to cut city programs or call on employees to pick up some of the cost.
“It’s a cost that we absorb,” he said. “We have to take away other things or look at other alternatives.”