By Niki Cervantes
Staff Writer

June 11, 2015 -- Santa Monica City officials chipped away at a $385 million debt for unfunded pension liability costs Tuesday by paying an extra $5 million as part of a long-term plan to get rid of some of the red ink.

The huge liability is primarily the result of a decline in value of plan assets, less in investment returns by the California Public Employees Retirement System (CalPERS) and a rise in benefits for public safety and other employees, City officials told the City Council Tuesday.

The payment comes on top of the $47.3 million the City already is set to pay for pensions in the 2015-2016 fiscal year – up from last year’s $39.4 million.

The yearly pension costs “make up approximately eight percent of the City’s budget, and to a large extent are outside staff’s direct control,” Gigi Decavelles-Hughes, the City’s finance director, said in a report. 

Santa Monica is attempting to whittle down its big unfunded liabilities bill through a variety of methods. They’ve imposed less generous benefits to newer employees. They also  “invest amounts saved in prior budget years,” said Decavalles-Hughes.

City officials are also counting on one-time increases in revenues and using money saved from short-term vacancies, among other items, she said.

In addition, the City is paying down its debt by investing savings with CalPERS, which is yielding a higher return than could be earned through the City’s portfolio, which is limited by state-mandated restrictions, said Decavelles-Hughes.

The Council also paid $5 million last year toward the debt. The payment for 2015-2016 brings to $30 million the amount the City has paid so far toward its unfunded pension costs.

Santa Monica is hoping to finish paying off the unfunded pension costs over a 30-year period.

Critics of municipal spending in general often note that the money paid for pensions could be used instead for public services.  Some cities, like Stockton and San Bernardino, have ended up in bankruptcy. Others have had to impose budget cuts.

Decavalles-Hughes did not say if cuts were considered by Santa Monica to rid the City of the debt.

“The City takes budget cuts very seriously, as they may impact services provided to the community,” she said

The City Council decided a few years ago to tackle the unfunded liability, paying lump sums to CalPERS toward that end.  This year’s payment is due prior to June 15.

The council voted in 2014 to start setting aside funds for annually for additional payments to CalPERS.  The minimum payment is $1 million from the General Fund.