This is the fifth installment in our series on the 2015-17 budget process, and the last one before the mayor’s budget is released today. Once the proposed budget is released, we will start discussing that document, first with a general summary, then a deeper look. For now, we take a brief look at the oft-discussed subject of pensions.
In any budget process there are many competing interests. Resolving these conflicts and arriving at a balanced budget is more art than science, involves trade-offs, and in the end, always involves prioritization. So what are some of the biggest priorities, aside from police, fire and other core city functions? Pension and retiree health care shortfalls have been the subject of much public attention. They were the subject of a City Auditor’s report about a year ago, a detailed report by the administration to Council in January of last year, and State legislation (the Public Employees’ Pension Reform Act of 2013, or “PEPRA”, more discussion here) in 2012.
The general sense of the discussion in Oakland has been that
- The closed police and fire pension plan (“PFRS”) will start requiring very significant annual General Purpose Fund contributions (probably about $34 million and climbing) in 2017-2018,and continuing through 2026;
- The City’s “Other Post Employment Benefits” (“OPEB”), by which the City pays retirees a fairly modest medical benefit reimbursement is paid on a pay as you go basis. It presently runs just over $20 million per year, and is projected to hit over $35 million in ten years and almost $50 million in less than twenty years.
- Much like other California municipalities, Oakland faces hundreds of millions of dollars in underfunded pension liabilities for its active employees, and serious State law constraints on steps that would reduce costs.