Local Government
Commentary: Stream of Unfunded Mandates Creating Tidal Wave of New Taxes

Commentary: Stream of Unfunded Mandates Creating Tidal Wave of New Taxes

By: Pedro Aceituno, Bell Gardens City Council Member.

Hundreds of California cities, counties, school districts and other local governments face bankruptcy as public employee pensions climb to at least 50 percent of their budget over the next few years. With unsustainable pension costs, there are no painless options left.

The California League of Cities is advising its cities to consider raising fees, reducing services, bargaining compensation plans with the unions or raising taxes. Which means local taxpayers and businesses will pay for these pensions, one way or another.

The California State Controller estimates that state and local governments have to deal with $254 billion in unfunded liability – the unfunded liability is the shortfall between retirement benefits that governments promised and the current funding available to meet those obligations.

For the City of Santa Monica, unfunded pension liabilities jumped 20 percent from one year to the next, rising from $387 million to $481 million. The 20 percent jump was outlined in an annual financial report, conducted by independent auditors, during a January 2018 city meeting.

For the City of Bell Gardens, unfunded pension liabilities increased over 23 percent, increasing from $31.1 million $38.3 million.

In Los Angeles, city retirement costs are on track to consume $1.3 billion of the general fund, with an estimated $2.5 billion in unfunded liability. The City of Glendale has an unfunded pension liability of $450 million and the City of Newport Beach is looking at a $350 million unfunded pension liability.

In 1999, then Governor Gray Davis signed Senate Bill 400, which started the death march of our unattainable pension crisis. More than 200,000 government workers were eligible to retire at 55 and collect more than half their paycheck for the rest of their lives, while others could retire at 50 and receive up to 90 percent of their pay for as long as they lived. Unions representing counties, cities and school boards demanded similar perks and in most cases they got them.

In 1999, the pension overhaul was sold with a promise “that it would impose no new costs on California taxpayers.” Two decades later, this promise was off by hundreds of billions of dollars in unfunded liability.

With unsustainable pension costs and few options for local governments, the pressures are only mounting. Our local cities will face some very difficult decisions in the upcoming years and the Legislature, who helped create this problem, should think long and hard before approving legislation with the promise “that it won’t impose any new costs.”

Hundreds of our fellow local governments are at the brink of bankruptcy, we can’t afford any new unfunded mandates or promises of future funding.

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