In a major decision Tuesday, the California Public Employees Retirement System voted to shorten the amortization period for new pension liabilities from 30 to 20 years. The move will speed up the rate of debt payments to CalPERS, likely increasing cities’ annual pension costs and heightening pressure on the state’s municipalities.
CalPERS says the new schedule will save cities money over the long term -- a sentiment echoed by Newport Beach Finance Director Dan Matusiewicz. But just three months ago, a cavalry of municipalities appeared before the board warning that such a change would test their ability to cope.
“Each new approach only adds to the costs of cities and therefore to the taxpayers,” Hayward City Councilwoman Sara Lamnin told the CalPERS board in November as it was considering speeding up debt payments.
Dane Hutchings, a lobbyist for the League of California Cities, also said the impact could be dire for some cities.
“When you have a city that is already on the brink, applying a 20-year amortization policy will put them over the edge.”
CalPERS said the new schedule is needed to ensure stability for the $345 billion pension fund. The changes will take effect in 2019, with the first payments due in 2021.
What does CalPERS’ decision mean for your city? Check out the reaction from the League of California Cities here.