New Sacramento City Manager Howard Chan is putting together his first budget proposal, and you might think with the improving economy, he would be able to hand out cash to this program or that.Even the much higher costs coming the next few years will likely not be enough, as experts warn that CalPERS' accounting and assumptions are still far too aggressive.
Instead, he’s warning department heads not to expect many of their pent-up requests, he’s focused on increasing revenue and cutting expenses, and he’s looking at least five years down the road.
There’s a very good reason: Higher pension costs are on the way because CalPERS lowered its expected investment returns. Sacramento’s additional payments are projected to rise from a manageable $3.2 million in 2018-19 to a frightening $29.4 million in 2022-23.
“It keeps me up at night,” Chan told The Sacramento Bee’s editorial board this week.
If the higher CalPERS contributions aren’t the stuff of nightmares for city and county officials across the state, they should at least be a big worry. The League of California Cities calls the pension issue the biggest obstacle facing every full-service city in the state. It is urging its members to run the numbers and to start taking necessary steps. It says some cities may have to consider hiring freezes and service cuts. Even then, the league warns, some cities might eventually veer dangerously close to bankruptcy.
Encinitas has $154 million in unfunded liabilities according to a conservative Stanford analysis.