After a couple of years of good fiscal times for San Diego’s city government, a spike in pension costs will force budget cutbacks next year, according to a report released Wednesday by the mayor’s office.
The city’s five-year financial outlook promises higher yields across all major revenue streams, along with increasing general fund surpluses in the outer years. The general fund pays for basic services, like public safety and libraries.
In the near-term, however, the revenue gains will be more than offset by a change in calculations made by the San Diego City Employees Retirement System board that will require higher city contributions, according to the report.
In the current fiscal year, the city’s contribution was $191.2 million. In the next fiscal year, beginning July 1, 2017, the payment will climb to $227.9 million, a jump of more than $36 million, according to the report.
The mayor’s office said financial management staff will ask departments to offer budget reductions for the next fiscal year.
“The good news is that our local economy keeps growing, and with continued fiscal responsibility we will balance next year’s budget,” said Mayor Kevin Faulconer.
“But the reality is that we’re still paying off the pension promises made by past city leaders, and that’s money that could be going to our neighborhoods,” he said. “It’s yet another reminder that unsustainable pension benefits cast long shadows, and City Hall must continue to live within its means and follow through with pension reform.”
City voters four years ago closed the pension system to new employees other than police officers in an effort to control costs. The SDCERS formula change is based on longer retiree lifespans and a poor investment performance, according to the mayor’s office.
Faulconer said a projected $37 million shortfall in the next fiscal year can be partially offset by a reserve fund approved earlier this year by the City Council. The fund currently has $16 million.
The following fiscal year, beginning July 1, 2018, has a projected $20.7 million general fund deficit, according to the financial outlook. In the final three years, surpluses of $500,000, $40.1 million and $80.1 million are forecast.
The mayor’s office cautioned that the outlook is not a budget document, but a tool for city leaders to use in future planning.
— City News Service
