A proposal by the mayor's office to set up a $15 million reserve fund to cover unexpected increases in pension fund contributions got a mixed response Thursday from the San Diego City Council.
In revisions to his original $3.2 million budget proposal for the fiscal year that starts July 1, Mayor Kevin Faulconer suggested the creation of the pension system stabilization fund. The city's annual contributions to its employee retirement system fluctuate based on several outside factors, including the performance of investments.
The city's pension contribution in the upcoming fiscal year is set at nearly $255 million, down 8.7 percent from the current year. The decrease is due, in part, to last year's solid investment performance.
On the other hand, this year's investments are trending under the annual target of a 7.25 percent increase in value, which would raise the city's contribution in the future, according to the Independent Budget Analyst's Office.
Chief Financial Officer Mary Lewis called investment performance "a large, uncontrollable" factor in determining the budgetary impact of SDCERS.
The main criticism of the stabilization fund idea was that putting the $15 million into an irrevocable trust means it could not be tapped in case of emergency, or in years that investments perform well and lower city contributions.
"I think it would be more appropriate to keep a certain level of funding available as excess equity, pending a council policy decision on whether to create this new pension stabilization fund and to discuss the actual details on how it would work," council President Sherri Lightner said.
Councilman Scott Sherman said he likes the pension reserve plan, and is concerned about future investment returns.
"We've looked at the stock market and those things over the last bit of time and it's been very, very stable to the high side, which worries me on where investment returns will come from in the next couple of years," Sherman said.
Lewis told the council members that the current plan is to set aside the $15 million in the upcoming budget, but not actually establish the trust until it is vetted by the City Council.
Overall, the revisions received praise from the council members, who will have to vote on a final spending plan next month.
