The three largest cities in Riverside County are still having difficulty in fully funding public employee pension costs.
The emergent problem of rising unfunded liabilities, soaring costs and falling investment returns have been a long-time coming. The challenge for city governments is to responsibly pay into an otherwise irresponsible system.
Local governments across the state have accrued massive unfunded liabilities. That is, they offer more in benefits than they can afford to fund. Part of the reason for this are the assurances from CalPERS and public sector unions that the system is healthy, the tens of billions of dollars in shortfalls aren’t a problem and that all that’s needed is more money.
The other reason is that investment return assumptions have typically proven unreliable, requiring taxpayers to make up for any and all shortfalls. As a result, city funding levels are dependent on decision-making by CalPERS.
The city of Riverside has struggled to adequately fund pension plans. The city has failed to consistently fulfill their annual required contributions, contributing 90 percent or less of the required contribution, which has grown to over $40 million a year.
According to the most recent valuation by CalPERS, the city faces an unfunded liability of about $182 million for public safety pensions and $240 million for general employee pensions.
The city of Corona has had similar problems. Between 2011 and 2013, the plan for general city employees has declined from 69.7 percent funding levels to 61.7 percent, with an unfunded liability of $106.6 million.
Police pensions fell from 74.7 percent to 66.3 percent funded, with a $58.4 million unfunded liability. Pension payments by the city have increased from $15.86 million in 2012 to $16.9 million in 2014.
According to Moreno Valley’s financial reports, pension funding fell from 70.2 percent to 64.7 percent from 2011-13. The city faces an unfunded liability of about $53 million. It has more than $4 million in annual pension costs.
While it is important for cities to make their full contributions in order to avoid incurring additional debts, there must be discussion of the appropriateness of continuing to participate in a costly system of questionable value to taxpayers.