City to consider pension stabilization measures
SAN DIEGO — The City Council Monday will consider two proposals to fortify the budget against unexpected spikes in city contributions to its employee pension system.
The mayor’s office has proposed establishing a pension payment stabilization reserve account, equal to 8 percent of the average of the last three years of city contributions to the San Diego City Employees Retirement System. That would equate to about $20.8 million.
Several members of the City Council, however, have balked about tying up the money for one use. Councilman Todd Gloria proposes to increase a general fund reserve account instead.
Most of the city’s contribution to the pension system comes from the general fund, which pays for basic services like public safety and libraries. The average city payment the last three years has been $259.9 million, according to a staff report.
The amount the city pays into SDCERS in a given year depends on a variety of factors, including the performance of the pension system’s investment portfolio and the discount rate — a determination of expected risk- free future returns.
The SDCERS board recently lowered its discount rate, so the city will have to pay more into the system in the next fiscal year than was originally expected, leaving less money available for city services.
A recent report from the city’s Independent Budget Analyst said both pension reserve proposals were fiscally prudent. The IBA also suggested that the City Council could adopt both ideas, creating a smaller pension reserve account and boosting the general fund reserve with what’s left over.