Manteca within five years will be paying over $19 million into the California Public Employees Retirement System (PERS).
That’s double the $9.5 million the city is projected to pay in the fiscal year starting July 1. To put that in perspective the jump is the equivalent of all the property taxes the city collected in 2015.
And while the entire hit won’t be on the general fund — more than a third of municipal employees are paid by enterprise accounts that rely on user fees such as wastewater, water, and solid waste — the increased obligation is expected to impact the city’s ability to do everything from hiring additional police officers to expanded services supported by the general fund.
The increased payments are the result of CalPERS lowering the expected rate of return from investments that fund checks it sends to retirees. The pension fund lowered the rate from 7.50 percent to 7.0 percent effective at the beginning of the 2018-2019 fiscal year. That is still significantly higher than the actual current reruns.
In a mid-year budget report in February the city financial department reported Manteca’s unfunded CalPERS liability is expected to go from $89.4 million to $95 million by 2025.
At the same time the city’s unfunded liability related to retiree health benefits is at $31.6 million.
The budget message for the spending plan for the fiscal year dawning on July 1 did have a bit of somewhat upbeat news regarding unfunded retirement obligations.
The city’s unfunded liability related to retirement enhancement benefits is $559,000.
The proposed budget puts $400,000 toward that shortfall to nearly wipe it out.
Manteca is not alone when it comes to retirement liabilities. Virtually every city, school district, and county in California as well as the state itself is facing massive increases in CalPERS contributions as the system deals with unfunded liability.
CalPERS as of January had a $139 billion shortfall with assets on hand to cover only 68 percent of their retirement obligations. It covers 62 cents of every dollar in actual pensions that are paid out with returns from investments, 25 cents from employer contributions, and 13 cents from workers paying into the retirement plan.
The current fiscal year payroll for all city employees — including sewer, water, golf, and solid waste employees working in those enterprise fund municipal divisions that are supported by users fees and not taxes — comes to $32.7 million and CalPERS payments to $11.6 million. The payroll is projected to reach $40.2 million in 2025 while the CalPERS payments will hit $25.2 million.
Employees contribute to the retirement fund as well. Their share this year is $1.6 million. Based on the current contract it will be almost $2.1 million in 2025.
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