The City of Vista is on the path to save $2.1 million over the next decade by paying down its unfunded California Public Employees’ Retirement System (CalPERS) liability. This will allow City officials to stabilize its CalPERS expenditures annually over the next decade, which will save the City money and ensure the pension system within the City sustains itself moving forward.
Unfunded liabilities are debt obligations that do not have enough funds set aside to pay them. The California Public Employees’ Retirement System was established in 1932 during the Great Depression. CalPERS has become the world’s largest pension system, serving two million members in retirement and partnering with nearly 3,000 public employers, including the City of Vista, in managing a pension fund.
On February 1, 2022, the Vista City Council held a workshop to discuss strategies to fund the City’s pension liabilities and provide direction to staff. The goal was to discuss options for paying down the City’s unfunded liability and to create an overall healthier Vista pension portfolio, so that the City pension system can sustain itself going forward.
Over the course of the past 15 years, the City has set aside $9.2 million in a CalPERS Reserve account. After reviewing the CalPERS total pension obligation with the consultant, the City Council directed staff to move forward with two recommended actions:
Pay additional discretionary payments to CalPERS: a) $3 million in FY 2021/22, and b) $4 million in 2022/23. The $7 million in payment will stabilize the operational CalPERS expenditures that have been steadily increasing over the prior six years.
Allocate $2.2 million to the City’s 115 Trust account which historically has provided a more favorable return on investment than the City’s pooled portfolio. The trust account allows the City to set aside extra resources for pension funds at reduced investment risk.
City staff will bring back the final recommendations to a future City Council meeting for formal consideration.
