By JOSH FRIEDMAN
The city of San Luis Obispo’s budget has more than doubled from approximately $100 million to more than $200 million over the last eight years.
Last week, the San Luis Obispo City Council adopted a two-year budget that totals $200 million in 2019-2020 and $208 million in 2020-2021, according to a city news release. By contrast, a decade ago, the city adopted a $95.6 million budget for 2009-2010 and a $100.5 million budget for 2010-2011.
In 2011, the city council adopted a pair of budgets that were slightly below $100 million. Rising staffing costs have contributed significantly to the doubling of SLO’s budget since then.
City officials are touting the new budget as an end to SLO’s pension-liability induced shortfall. SLO officials are now projecting a balanced budget for the next five years, ending in 2023-2024, with a commitment to paying off its approximately $150 million in unfunded pension liabilities.
Following a decision by the board of the state retirement system, CalPERS, to lower its investment forecasts, SLO had been facing a projected $8.9 million budget gap over three years. The budget gap is now closed, and San Luis Obispo will increase its pension payments in order to eliminate its unfunded liabilities over a 20-year period, city officials claim.
SLO plans to invest $13.8 million in a pension trust, a special fund that will protect the city against pension rate fluctuations and will enable it to earn higher returns on investment funds in its plans, according to the city press release. Likewise, the city is creating a $1 million General Fund Revenue Stabilization reserve to help offset unanticipated market fluctuations.
The increasing efforts to pay down unfunded pension liabilities come at a time when the city’s retirement costs have been skyrocketing. SLO’s annual payments to CalPERS have increased to more than $10 million in recent years and could exceed $20 million in the coming decade.
Additionally, CalPERS is still phasing in changes to its investment forecasts, which causes unfunded liabilities to spike. In response to questions from Cal Coast Times in Oct. 2017, City Manager Derek Johnson said SLO had an unfunded liability of more than $165 million when factoring in the CalPERS rate adjustments.
As Cal Coast Times recently reported, the average full-career retiree from the city of SLO receives an annual pension of approximately $90,000.