By Tom Moutes, RLACEI Legislative Director
Last month, I wrote about two things Retirees should watch for in the City’s budget process: the projections of City retirement contributions; and the projected City budget deficits for fiscal year 2022-23 and beyond. As of the writing of this article, the mayor has proposed a budget for the next fiscal year and the City Council budget hearings have begun. The news from the budget hearing has been very positive on these two items.
The Projections of City Retirement Contributions
While the City’s annual contribution to LACERS is expected to increase by $31 million next fiscal year, that is more than offset by an expected $55 million decrease in the City’s contribution to Fire and Police Pensions (LAFPP), for a net total decrease to the City of $24 million.
Further, the City’s projections of its contributions to the pension funds over the next five years decrease each year. Of course these projected decreases are based on many assumptions, including but not limited to the investment returns of LACERS and LAFPP and the City’s payroll on which the contribution projections are based. Said differently, if the investment returns are significantly lower than expected and/or the City’s payroll is much higher than expected, the resulting pension contributions could increase beyond what is currently expected.
The Projected Budget Deficits for Fiscal Years 2022-23 and Beyond
The mayor’s proposed budget contains surpluses for next year and the following three years! This year and the last fiscal years, the City has been flush with cash thanks to the federal government’s American Rescue Fund (ARF). There was some concern that not having more ARF proceeds in the coming years, the City might end up back in deficit situations. However, the upcoming City budgets look to be structurally sound at this point.
The rosy budget outlook could change depending on several factors such as inflation, lower-than-expected revenues and/or higher than projected costs, but at least for now, the outlook appears good.
Overall, the City’s finances seem to be looking good, which is great news for active and Retired City employees!