Santa Cruz County Civil Grand Jury 2014-2015 Response Packet Funded for the Future?

Continually rising retirement costs and obligations put funding of jurisdictions' services and projects at risk. AGREE x PARTIALLY DISAGREE - explain disputed portion below DISAGREE - explain below Response explanation (required for responses other than “Agree”): Rising retirement costs do put pressure on the budget, but it is not the only factor. Personnel costs in general are 80% of the City’s General Fund budget. Retirement costs are a part (13%) of that overall cost. The City needs to stay competitive with salaries to keep qualified employees. Salaries are a much larger part of the budget at 42%. The economy is another large factor to having the resources to provide services. The City has endured two economic downturns in the last 10 years. These were prior to the latest increase in retirement costs. The City needed to take measures during those time periods to maintain its budget. The City will continue to take necessary steps in the future due to any factors affecting its budget.

A clear and complete statement of the total retirement costs and obligations has not been provided in the budget narrative for either the public or elected officials. x AGREE PARTIALLY DISAGREE - explain disputed portion below DISAGREE - explain below Response explanation (required for responses other than “Agree”): The City does provide more information in its annual financial statements as required disclosures directed by the Governmental Accounting Standards Board. The budget provides budgeted line items for each department, but also provides a General Fund recap of total amounts for each budget line item, including retirement. The budget is primarily a document for that fiscal year’s budgeted revenues and expenditures, but information regarding future costs could be incorporated into the narratives.

Enrollment in the CalPERS Employers Retiree Benefit Trust Fund reduces employer contributions, prevents retiree health obligations from becoming a significant budget liability, and contributes to a positive credit rating. AGREE x PARTIALLY DISAGREE - explain disputed portion below DISAGREE - explain below Response explanation (required for responses other than “Agree”): Enrollment is only part of the solution. There are no mandatory contributions for this Trust Fund. Contributions can be made as the City wants or has the resources to do so. Having sufficient funds to invest in the Trust Fund is the main issue. This relates back to Finding #1 above regarding budget impacts on the City and having sufficient funds to meet the various competing needs in the budget. Employer contributions are reduced through investment earnings from City funds invested in the Trust Fund. Without sufficient resources to invest, any meaningful reduction in employer contributions will not happen. The same holds true for preventing the retiree health obligations from becoming a significant budget liability and contributing to a positive credit rating.