Santa Maria, CA, has a biennial “balanced” budget, but at what cost? As an elected official in Midland Park, NJ (Borough Councilman), I am keenly aware of the impact on municipal budgets from rising pension and healthcare costs. Our budget took a hit earlier this year when NJ decided to reduce the return on asset assumption from 7.625% to 7% in the last days of former Governor Christie’s last term.
In our case, the “hit” was short-lived, as Governor Murphy’s team elevated the ROA objective back to 7.5%. However, poor Santa Maria doesn’t appear to be as lucky, as they had to allocate to their general fund millions of dollars in precious funds usually reserved for times of economic instability. Contributions to the California Public Employees Retirement System (CalPERS) have spiked by $4 million in just the last five years, and forecasts of future contributions appear to continue with this escalation.
The ramp up in expenditures is part of the reason the Santa Maria City Council faced an $8.5 million deficit in the first year of the biennial budget’s general fund. And it’s why council members ultimately opted to pull funds from the city’s Local Economic Augmentation Fund (LEAF) and additional monies from its Economic Stabilization Fund, the latter of which has never been drawn upon except in times of recession.
According to a June 27th, 2018, article that appeared in the Santa Maria Sun, the city’s Public Information Officer Mark van de Kamp explained that “LEAF, which at its peak held about $11.7 million, would give the city an extra $2.6 million this coming year and an additional $1.1 million in 2019-20. By then, he said, the reserve would be “totally exhausted.”” Then what?