Santa Rosa's pension costs are set to soar by about $12 million over the next six years as it is forced to pay higher rates by a state pension system trying to come to grips with a massive gap between its assets and what it owes current and future retirees.
The increases of about $2 million per year would result in the city by 2020 paying about 45 percent more that it does now toward employee pension costs, already one of the largest costs in the city budget, the City Council learned Tuesday.
Costs would rise from about $27.4 million a year now to nearly $40 million in 2020, a figure that city actuary John Bartel said he knew was difficult for the city leaders to swallow.
“From a budget standpoint, it's horrible,” Bartel told the council.
But he also argued that the pain would be worth it because it would begin to bridge what is a nearly $200 million gap between what the city owes its current and future retirees and the money it has set aside to pay for their rapidly increasing retirement benefits.
“From an intergenerational taxpayer point of view, I think it's the right thing to do,” Bartel said. “From actuarial perspective I think it's the right thing to do.”
The increases keep coming in spite of city and state pension overhaul efforts which focused on establishing lower pension benefits for new workers.
That's because the lower tiers, while helpful in controlling costs long-term, won't affect a large percentage of the city's workforce for more than a decade, Bartel said.
Bartel explained that his estimates are based on several factors, most of which revolve around policy changes the state Public Employee Retirement System has either already made or is likely to make in the near future.
One was the CalPERS board's April decision to base rates that it requires cities and other public agencies to pay annually on the actual, or market, value of the assets in the funds. The previous method allowed another method to be used, called the actuarial asset value, which smoothed out changes in value over several years but which critics argued allowed cities to pay less than they truly owed.