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League Survey Confirms Need for More Tools to Sustain Pension System and Local Services

February 1, 2018
A report released today by the League of California Cities®, Retirement System Sustainability Study and Findings, confirms that pension costs for California cities are approaching unsustainable levels, and that cities need more tools and options to ensure they are able to retain and attract public sector employees and continue to deliver high quality municipal services to residents.
 
Dozens of city leaders in recent months have testified before the CalPERS Board of Administration on the urgent need for more solutions and flexibility at the local level to address the rising costs associated with pensions. These leaders, representing mayors, council members, city managers, finance officers and public safety each told their own cities’ stories during meetings in September and November 2017
 
League Executive Director Carolyn Coleman commented on the importance of this study, which follows numerous representatives from California cities giving voice to the challenges they face delivering services as costs increase.
 
“The League commissioned this study to put analysis and hard numbers to the realities that cities up and down the state are experiencing with growing pension costs,” said League Executive Director Carolyn Coleman. “As the amount cities have to pay into CalPERS each year increases, it puts a great strain on their ability to maintain service delivery levels. The pressures are not only mounting, but will force cities to make very tough choices in the near future. This much-needed data will help inform ongoing discussions with all stakeholders about solutions that will ensure our public sector retirement system is sustainable and that cities have the resources needed to serve their residents.”
 
Key Findings
 
The study reveals three key findings:
  • Rising pension costs will require cities over the next seven years to nearly double the percentage of their General Fund dollars they pay to CalPERS;
  • For many cities, pension costs will dramatically increase to unsustainable levels; and
  • The impacts of increasing pension costs as a percentage of General Fund spending will affect cities even more than the state because employee costs, including police, fire and other municipal services, are a larger proportion of spending for cities. 
Methodology
 
Bartel Associates, LLC, a leading California actuarial firm serving only public sector clients, conducted the study that examines costs to cities over a seven-year period between FY 2018–19 and FY 2024–25. The analysis was based on two main sources: CalPERS’ June 30, 2016, public agency actuarial valuation data and the League’s Oct. 18, 2017, City Survey. The study was limited to pension liability only and does not reflect the costs to cites associated with active or other post-employment benefits such as health care.
 
The complete report is available at www.cacities.org/pensions.


 
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