Garden Grove

Pension costs add red ink to budget

INCREASED PENSION costs are leading to growing deficits for area cities, including Garden Grove.

By Jim Tortolano

Increasing budget deficits are in the future for the City of Garden Grove as the municipality struggles to deal with a sharp increase in the cost of pension liabilities.

On Tuesday night, the council approved a two-year budget for the years 2017-18 and 2018-19 after hearing city staff tell of the challenges facing the Big Strawberry – problems which many cities are now tackling.

CalPERS, the state agency which administers public employee pensions for state, county and city employees across California, in late 2016 reduced its discount rate from 7.5 to 7 percent. The rate corresponds to a lowered assumed rate of return on its investments, meaning that CalPERS is requiring that cities like Garden Grove contribute more money to keep the retirement fund afloat.

The impact on Garden Grove means a $2 million increase in the city’s costs in 2017-18 and an additional $3 million hit in 2018-19. Within five years the total annual burden could amount to $11 million.

“These costs are serious and are potentially crippling to a city of our means,” said City Manager Scott Stiles.

The combined budget package for next year will be $244.3 million, growing to $247.2 million in the second year. The city’s deficit – the amount of money that must be taken from reserves to balance the budget – could grow from $4.2 million for the fiscal year just ending to as much as $8 million in the 2018-19 spending plan.

There were some bright sides to the financial picture presented to the council. “Our revenue is performing as we had hoped and projected a year ago,” said Stiles, and that in the first year of the two-year budget “we will be able to get through in pretty good shape.”

The 2017-18 plan also calls for adding two more police officers to the payroll, bringing the number of sworn employees of the police department up from 166 to 168.

Also included in the budget is replacement of the city’s business management array of software and hardware with a new “enterprise resource planning” system.

 

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