What Leaders Can Expect Each Fall.
Michael McDaniel
April 9 2008
Full Unfunded Liabilities Report
Each October CalPERS provides a report to the agencies which it serves. Within this report one can find several meaningful figures. 2 of these numbers will smack a self respecting taxpayer upside the head. The first number is a "contribution rate." This "contribution rate" instructs the city/county on the amount they need to set aside per employee to adequately fund their pension plan. Right now for example, the contribution rate on a Grass Valley public safety employee is 28.49%. Which means that the city needs to pay $28.49 into the pension plan for every $100 paid in salary to a public safety employee (which sadly is lower than the rate at Nevada City and Nevada County). What determines the contribution rate you ask? Employee ages, Employee years of service, salary increases, investment returns by CalPERS, and plan amendments.
The second meaningful number is the amount of "side fund" or Unfunded Liability. This is the amount that past leaders have failed to set aside for employee pension benefits. As of June 2006 the City of Grass Valley's unfunded liabilities were north of $4,000,000. Keep in mind the total operating budget of Grass Valley is approx $12,000,000. What is the impending surprise for Grass Valley leaders you ask? The contribution rate and the amount of unfunded liabilities are affected by the investment returns earned by CalPERS investment councilors, salary increases, and PLAN AMENDMENTS. In late 2007, GV voted to give a whopping plan improvement to their misc employees. And you thought $4 million was bad...This amendment increased the pension benefits of misc employees by 25%! Add together this enormous increase and a poor investment environment and you get a ballooning unfunded liability figure. We'll have to wait until next fall to see the impact of the 25% raise.
Another piece of discouraging news is the tardiness of the reporting. See if this fact hurts your head as much as it hurts mine: The most current accounting of the public employee pension plans are always 2 year old. Ya, that is right. CalPERS reserves the right to account for each agencies pension plan until 2 years after the fact. Thus, like GV's $4,000,000, that is a number based on 2006 data.
I can't wait for October 2008, 2009 and 2010!
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