As Nevada City budget stabilizes, pensions a problem
For the first time in five years, Nevada City’s revenues are expected to be higher than its expenditures as it looks ahead to the next fiscal year, its finance director said.
But years of financial municipal mends may only lead to another challenge as the California’s Public Employees’ Retirement System has warned government agencies of impending change beginning in 2015.
“A point of future concern for the city that should be on the list of items to begin financial preparing for is the future rise of CalPERS pension costs beginning fiscal year 15-16,” said Catrina Olson, Nevada City’s finance director, at a May 23 city budget workshop with the town’s council.
The impending CalPERS changes will require public agencies to increase their contribution rate for the next 10 years by 6.3 percent from 17.8 percent to 24.1 percent, according to the League of California Cities.
Looking ahead to the 2013-2014 fiscal year, Olson anticipates a 0.746 percent increase in CalPERS cost for miscellaneous employees and a 1.443 percent increase for safety employees (such as police and firefighters), she said in her report to the council. Olson noted though that pension costs for 2013-2014 are expected to only increased $3,000 overall from mid-year 2012-2013 due to the retirement of two long-term employees.
The CalPERS changes adopted April 17 will affect 2,200 state and local governments and school districts. It’s been estimated that the system now has an unfunded liability of $87 billion, according to the League of California Cities.
While Olson noted that CalPERS now has 74 percent of the funds it needs to cover benefits over 30 years, she said it is possible that as retired annuitants live longer, that amount could reduce to 50 percent or lower.
“There is a great amount of uncertainty across the state,” said City Manager David Brennan in early May during an interview with The Union. “We do know rates are going to go up.”
The impending changes come as Nevada City has finally reached financial solvency, thanks in part to voters approving a five-year increased sales tax.
Over the last two fiscal years, the city has seen a slow but improved financial position in the general fund balance, Olson noted at the budget workshop. The city has had a financial improvement in the unassigned fund balance over the last two fiscal years, moving from a $64,000 negative fund balance to a projected $7,000 unassigned positive fund balance for the fiscal year ending 2012-2013, Brennan said.
“The unassigned fund is the one we look at for fiscal health,” Brennan said in an interview with The Union Friday. “It’s the difference between having to borrow money and balancing your finances.”
Looking at upcoming increases, Olson said it is crucial not to increase the city’s obligation more than CalPERS is demanding.
“We have to keep our overall employee headcount flay,” said Councilwoman Sally Harris at the workshop.
To contact Staff Writer Christopher Rosacker, email firstname.lastname@example.org or call 530-477-4236.
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