City Council reviews pension funding strategies amid rising unfunded liabilities

The Albany City Council's Audit & Fiscal Sustainability Standing Committee convened on April 14, 2025, to address pressing issues surrounding pension funding, a topic that has significant implications for the city's budget and long-term financial health. The meeting highlighted the complexities of pension costs, which have been rising steadily, driven by factors such as salary growth, investment returns, and life expectancy changes.

Pension funding is a critical aspect of the city's financial planning, with the unfunded actuarial liability (UAL) currently estimated at approximately $45 million. This figure represents the gap between the pension benefits promised to employees and the funds available to pay those benefits. The committee discussed the impact of fluctuating investment returns on the UAL, noting that poor market performance can exacerbate the city's financial obligations.

One of the key strategies discussed was the importance of making the annual UAL payment at the beginning of the fiscal year, which could yield a 3.4% discount. The committee also explored the potential for restructuring UAL payments through a "fresh start," akin to refinancing a mortgage, which could lower overall costs but would require higher payments in the short term.

The committee emphasized the need for ongoing monitoring of pension costs and the exploration of additional strategies, such as establishing a pension pre-funding trust. This trust would allow the city to invest funds specifically for pension liabilities, potentially offering greater returns but also introducing more risk.

While the committee acknowledged the challenges posed by rising pension costs, they underscored the importance of maintaining a cautious approach in the current economic climate. The discussion concluded with a commitment to continue evaluating the city's pension funding strategies as part of the broader budgetary process, ensuring that the financial needs of Albany's residents remain a priority.

As the city navigates these complex financial waters, the outcomes of these discussions will play a crucial role in shaping Albany's fiscal sustainability and the well-being of its public employees.