ITEM 15 ATTACHMENT 1 - Laserfiche WebLink

Major Expenses - Personnel gF kip r Personnel is the largest cost category in the City's budget comprising 67.8 percent of the City's expenditures. The Personnel expense category includes salaries, overtime, health benefits, workers' compensation, and pensions. Each major Personnel cost category is discussed separately below. Salaries Salaries are set through labor agreements for most employees and for several years have increased by approximately three to four percent annually. The FY 2025/26 and FY 2026/27 budgets include salary increases consistent with the City's labor agreements. The City is in negotiations with three labor groups: Pleasanton City Employees Association (PCEA), International Association of Firefighters (IAFF), and Fire Battalion Chiefs. PCEA's Memorandum of Understanding (MOU) is scheduled to expire on May31, 2025, and IAFF and Battalion Chief MOUS are both scheduled to expire on June 30, 2025. Funding will be determined and updated once the new MOUS are finalized and will be reflected through the FY 2025/26 Mid -Year Budget Review process. Health Benefits The City's labor agreements limit the City's contribution to health benefits to the Kaiser Permanente premium rates. Annual premiums tend to fluctuate considerably. Premium rate changes are primarily based on City staff and retirees' prior year's utilization of Kaiser Permanente's services. The biennial budget includes an annual increase of 7.0 percent in Kaiser Permanente premiums. The City receives health benefit premium rates everyyear in April for the subsequent fiscal year; thus, the FY 2026/27 Mid-term Budget will be adjusted to reflect the actual change for that year. Workers' Compensation The budget for workers' compensation claims is adjusted by approximately $0.2 million from FY 2024/25 to FY 2025/26 to set aside funding necessary to cover both current as well as future claim costs. Contributions to the Workers' Compensation Fund will be gradually increased to build reserves over the next several years to ensure there is at least 70.0 percent of the claims liability available to pay future claims. Pensions The City's pension expenses have substantially increased since the Great Recession, primarily due to California Public Employees' Retirement System (CaIPERS) investment losses and various changes in CaIPERS policies related to calculating pension liabilities. The most significant of these changes is the reduced CaIPERS discount rate. In January 2017, CaIPERS adopted a policy that reduced the CaIPERS discount rate from 7.5 percent in FY 2017/18, to 7.0 percent in FY 2020/21, and then to 6.8 percent in FY 2021/22. CaIPERS' goal is