Walnut Creek discusses pension costs and strategies to manage $155M CalPERS debt

The Walnut Creek City Council convened on March 18, 2025, to address critical financial matters concerning the city's pension obligations, particularly its unfunded accrued liability (UAL) with CalPERS, which currently stands at $155 million. This liability is split between the safety police plan and the miscellaneous plan for non-safety employees, with the city actively working to mitigate rising pension costs through strategic financial planning.

During the meeting, city officials highlighted the importance of the $29 million in the city's 115 trust, established to help manage pension costs. This trust has been bolstered by proactive contributions of nearly $19 million over the past eight years, alongside investment earnings. The council discussed how these funds could be leveraged to address the anticipated increase in pension payments over the next decade, particularly as the city faces a "mountain peak" in payments due to the amortization of the UAL over 20 years.

The council also reviewed the implications of CalPERS' changing discount rates, which have decreased from 8.25% to 6.8% over the past two decades. This reduction has significant budgetary impacts, as lower expected returns necessitate higher contributions from the city to cover pension obligations. The council is preparing for potential increases in the UAL if CalPERS lowers its discount rate further, which could add an additional $20 million to the city's liability.

In response to these challenges, the council is considering a policy for the use of pension resources that emphasizes maintaining service levels during deficit years without expanding services. This policy aims to ensure that the trust is utilized effectively to manage rising pension costs while balancing short-term budget relief with long-term financial sustainability.

The meeting underscored the city's commitment to addressing its pension liabilities responsibly, with a focus on strategic planning and community impact. As the council moves forward, it will continue to assess the financial landscape and adapt its strategies to ensure the city's fiscal health and the well-being of its residents.