San Mateo has an honest Grand Jury—even if the County Board of Supervisors and the city councils in each of its cities are unwilling to tell the public the truth. The truth? The collapsing pension system is going to economically destroy local government.
“Unfunded pension liability is particularly hard on cities because they have to pay “amortization” costs on it, which is the principal of the amount plus interest accrued at high rates over long periods. Interest is generally set at the same percentage of CalPERS’ assumed return on investment, and repayment has generally been set over a 30-year period.
In February, the CalPERS board shortened future amortization periods to 20 years, which is expected to eventually decrease overall costs but increase annual funding requirements.
According to the report, cities already spend the majority of their pension dollars – about 60 percent – on amortization costs, of which a major part is interest, in addition to regular annual pension costs (though this breakdown varies widely in the county).
In the 2017-18 fiscal year, East Palo Alto paid a low of 38 percent of its total contribution costs for amortization, while Half Moon Bay paid a high of 79 percent. Menlo Park fell somewhere on the lower side among cities in the county, spending about 51 percent on amortization costs.
Even in the ultra rich San Mateo, taxes can not go up high enough to finance the pension system, Public safety will be cut. Road repairs will not happen. Library hours must be cut back—and even with that, the system will collapse. At least the San Mateo Grand Jury is honest enough to warn the public of the problem. Will anyone listen?
August 7, 2018
California Political Review
By Stephen Frank
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