By the Daily Post staff
The city of Palo Alto’s unfunded pension liability has increased by 4.7% to $476 million, according to CalPERS, the agency that runs the city’s pension funds.
However, that percentage doesn’t reflect the city’s effort to hedge against the liability by putting money into a side fund for pensions. That effort is showing some success in reducing the liabilities.
City Manager Ed Shikada relayed the news to the City Council’s Finance Committee in this report (see PDF page 5) that gives the annual figures for pension liability.
Here’s Shikada’s report (see PDF page 5) from one year earlier for comparison purposes.
The reports show that that for the fiscal year ending June 30, 2018, the city’s liability according to CalPERS was $455,568,431. A year later, on June 30, 2019, the liability had grown to $476,924,698.
The growth in the unfunded liability in one year was $21,356,267, or 4.68%.
The term “unfunded liability” means the city has no ability to pay this debt.
In the early 2000s, the city’s pension liabilities were fully funded. Today, between 61.3% and 66.1% of the city’s pension liabilities are funded.
This problem isn’t unique to Palo Alto. CalPERS, which covers state and local government employers, has a total unfunded liability of $138.9 billion. CalSTRS, the pension program for school districts, has a $107.3 billion liability. Those figures are from the Public Policy Institute of California.
But the official CalPERS numbers from Sacramento don’t reflect an effort by the city to prepare for a future pension shortfall by stashing money into a side fund.
This side fund, formally known as a Public Agency Retirement Services Section 115 Trust Fund, aims to pay off 90% the city’s unfunded pension liability in 15 years. (Details are in this June 16 report from Shikada.)
For the year ending June 30, 2018, the city’s 115 Trust Fund had $22,012,777. A year later the fund had grown to $32,282,584 due largely to contributions the city council made from the city budget.
When the side fund numbers are applied to the city’s unfunded liabilities, the city’s pension picture looks more positive.
For the year ending June 30, 2018, the city’s pension liability drops from $455 million (the CalPERS number) to $433 million (including the side fund).
For the most recent fiscal year ending June 30, 2019, the liability falls from $476.9 million to $444.6 million.