SR 06:127 - Laserfiche WebLink

"normal"cost of the benefits contracted for. However, in years that the portfolio underperforms, rates rise above the "normal" cost (with a three year time lag). Conversely, in years that the portfolio outperforms expectations, rates fall below the "normal" cost. For most of the last decade public agencies have been paying rates that were far below their normal cost, even 0%. As can be expected, the savings were used for other things. Pleasanton was one of a very few agencies that continued to budget for its "normal" PERS costs, even though the rates paid were much lower. The dollars were then directed for other one-time items, so the City could easily return to paying normal costs without a negative impact on future budgets. What Pleasanton and almost every other public agency did not do, was set the dollars aside to be used in future budgets when the rates again climbed above the normal cost. And so, when the PERS portfolio had losses Qr under performed in 2001, 2002 and 2003, PERS spread the losses over rnultiple years starting in 2004, whereby it will need to pay above normal rates for several years. While the budget can accommodate the portion up to the normal rates, the balance has had to come from belt tightening, in particular since the City is simultaneously dealing with local economic impacts and revenue takeaways by the State to help balance its budget. While the City has still been able to prepare balanced budgets and not reduce service levels, this is not an ideal situation. Staff recommends that the City adopt a program that requires funding of at least the "normal" PERS costs each year, and setting the dollars aside in a reserve in years that rates are less than normal. The reserve can then be used in later years when the usual up and down economic cycles result in rates being above normal. Such a policy is consistent with Goal 5 of the Fiscal and Economic Element. It would help ensure an understanding and recognition of the full cost of retirement benefits, simplify long-term financial forecasting, and help guarantee a stable and balanced budget. The Economic Vitality Committee recommends that the City require funding of at least the "normal" P ERS costs each year, and set money aside in a reserve in years that rates are less than normal. This reserve can then be used in later years when the usual up and down economic cycles result in rates being above normal. 35