Santa Monica’s 2019-2021 budget is 7% or about $108 million smaller than its last biennial budget, marking the beginning of a decade where the city will have to pay down a $448 million pension liability while adjusting to tepid revenue growth.
Although the city is tightening its belt, the almost $1.6 billion biennial budget City Council adopted Tuesday boosts funding for homeless services, rental assistance for low-income seniors and a new website officials call a “digital City Hall.” It also maintains funding for a $77 million annex at City Hall, a $115 million reboot of City Yards and new water infrastructure to wean Santa Monica off imported water by 2023, protecting the city from future droughts and higher water rates.
A $9.3 million payment to CalPERS, the state pension fund, kicks off the city’s 13-year plan to pay off the pension liability ahead of time. CalPERS fell into crisis following the 2008 recession and jurisdictions across California now have to make up a massive shortfall between the pensions the state promised to workers and the balance of the fund.
Santa Monica’s accelerated repayment plan will save more than $100 million in interest, said finance director Gigi Decavelles-Hughes. Even so, the pension liability and eroding revenues from sales tax as consumers shop online instead of in Santa Monica’s brick-and-mortar stores could put the city $50 million in the red over the next 10 years if it doesn’t cut costs. A looming recession would only make matters worse.
We are still paying off the pension losses from the crash. Santa Monica is rich persons country, always generous with the pensions. Yet, even in this wealth enclave, a 7% reduction of government is recessionary. I take it that local hiring had all but stopped, hence the teacher strikes. My random reading of Pension Tsunami reveals that conclusion as they report budgets around California.
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