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Council adopts updated pension funding policy; excludes Prop 4‑78 surplus from paying down unfunded liability
Summary
Prescott council adopted Resolution No. 2025-51913 updating the city's pension funding policy, clarifying that voter-approved Prop 4‑78 public-safety sales-tax revenues and donated/grant funds are excluded from being used as unencumbered operating surplus to pay down pension unfunded liabilities beyond routine required contributions.
The City Council adopted resolution No. 2025-51913 on March 11 updating Prescott’s pension funding policy. Budget and Finance Director Mark Whitfield (presenting) said state law requires cities to adopt a pension funding policy each year and that the policy language had been updated to clarify how the city will apply any year-end operating surpluses to address actuarial unfunded liabilities.
Key points - Exclusion of Prop 4‑78 surplus: The adopted language specifically excludes the voter-approved public-safety sales tax (Prop 4‑78) from being treated as unencumbered general-fund surplus available to pay down unfunded liabilities beyond the regular actuarially required contribution (ARC). Whitfield confirmed that payroll and ARC for employees funded through Prop 4‑78 will be paid from that revenue stream but surplus in those dedicated funds will not be treated as available for general unfunded liabilities. - Annual update: Staff will continue to update the policy each year as part of the annual budget and actuarial process, consistent with Arizona law requiring a funding policy that recognizes pension liability.
Why it matters: The language clarifies how the city will treat different revenue sources for actuarial planning and aims to provide a consistent framework for using one-time surpluses or operating surpluses to reduce pension shortfalls while avoiding the use of restricted or voter-directed revenue.
Vote: The resolution passed 7-0.
Quote "That's the way it is written. And, yeah, I mean, of course, that would be intent. There's no reason to," Budget and Finance staff said in describing the policy's exclusion of Prop 4‑78 surplus for paying down unfunded liability beyond ARC payments.
Ending Staff will implement the policy language in future budget documents and return any required actuarial reporting as part of the usual budget and trust-funding work.
