In what is good news, Sacramento’s city manager is providing the city council all of the information needed to make good budget decisions prior to having to make them, as reported by the Sacramento Bee.
“With the amount of unfunded debt the city of Sacramento faces over the next three decades, you could build a light-rail line to Sacramento International Airport. And when you got there, you could build another terminal.
“That’s the stark message delivered Tuesday by City Manager John Shirey, whose office laid out the city’s nearly $2 billion in unfunded liabilities to a subdued City Council. Those bills include bond and lease payments on public projects, pension contributions and retiree medical benefits – some of which have no stable funding source.
“It was the first time those mountainous obligations were presented to the City Council as a whole. But with a council that includes two new members and is entering another round of budget discussions, it was a statement that needed to be made to avoid future difficulties, Shirey said.
“I know these numbers are big and can seem scary,” he said in an interview. “This is about trying to inform and make people aware that the city does have debts and liabilities, and we are managing them. If we’re prudent in our financial dealings, we’ll be fine.”
“Most worrisome, Shirey said, is $440 million in retiree medical benefits that the city has no plan to fund besides annual payments of $11 million from the already battered general fund budget, which funds core city services such as police protection, park maintenance and fire personnel. The total unfunded liability stemming from medical benefits has grown by $60 million in the past five years.
“Under agreements reached between the City Council and labor unions more than 20 years ago, most city retirees receive $300 a month for medical costs. Employees who retire from the Fire Department get roughly $750 a month.
“The pay-as-you-go formula that funds those benefits is not sustainable, Shirey said. To keep pace with future obligations to the medical benefit, he said annual payments by the city would need to increase by $30 million. Instead, Shirey said he plans to address the threat by seeking concessions from labor groups and creating a more structured funding mechanism for the benefits.”