Tag Archives: Berkeley pension liabilities
Berkeley faces difficult path to funding pension liabilities
The City Council heard a sobering report from outside actuary John Bartel at its special meeting on Tuesday night this week.
“I wore my Valentines Day tie, but that’s unfortunately the only good news I have here,” Bartel said. “Your contribution rate will not be going down. It will actually be going up in the future.”
The council has had a number of presentations on the unfunded pension liabilities in the last year. On Tuesday, Bartel explained that the actuarial target he was encouraging the city to meet was to reach 100% funding of the liabilities “over a reasonable period of time”.
But the difficulty of achieving that was highlighted by the figures Bartel presented. For the police safety plan — overwhelmingly the largest cost and the largest unfunded liability for the city — the city is currently paying 42% of salary in pension contributions. To reach a target of 80% of the liabilities funded in 20 years, Bartel said the city contribution would have to rise to 50.7%. To reach 80% funded in 10 years, the contribution would climb to 61.5%. … Continue reading »
Council faces tough decisions on unfunded liabilities
The Berkeley City Council special session on the $310 million — or higher — unfunded liability on promised employee benefits revealed the difficult choices faced by the city.
A presentation by budget manager Teresa Berkeley-Simmons made the root of the problem clear. The California Public Employee Retirement System (Calpers) assumed annual investment returns of 7.75%. The crash of the Great Recession in 2008 meant that returns in the fiscal year ending June 30, 2009 were negative 24%, producing an annual loss against assumptions of 31.75%. For Berkeley’s city employees, that has produced investment losses of $200 million.
“We can’t grow our way out of this,” Berkeley-Simmons said.
“Even if Calpers gets 7.75% forever now, they have lost $200 million on which we’ll never get 7.75%,” explained City Auditor Ann-Marie Hogan.
City Manager Phil Kamlarz said the money to close the gap has to come from either increased contributions or a reduction in cash available for city services, or some combination of the two. Long term, the gap can be closed by reduced benefits for new employees, but that does little in the short and medium term.
“Rather than cut services, people are asking employees to contribute more,” said Mayor Tom Bates. “That’s the path we have to go down. People will need to start contributing more. It’s unfortunate, but they’re lucky to have a job.” … Continue reading »
