City of Santa Monica Study Session on City Budget Ignores Elephant in the Room
No one knows how Santa Monica will pay the lavish pensions of former City Employees
June 1, 2018
On Tuesday night, May 22, the Sant Monica City Council conducted a study session on the City's budget. Residents were invited to send in letters and share opinions in an open forum.
The main problem is the City's current $461 million unfunded pension liability, which the City hopes to retire within 30 years. The City of Santa Monica pays over 200 employees more than $120,000 per year, and is notorious for overpaying its employees.
"We are not in a position of crisis, but a period of reshaping so we can meet environmental and social goals," said City Manager Rick Cole.
Santa Monica's annual $650M budget is roughly divided 30/70 between into capital expenditures (vehicles, fuel, materials, etc.) and personnel compensation (employee salaries and benefits – including pensions), says a budget advisory group that advocates retiring the pension liability sooner, by 2030.
"Allocating $40M from the City's operating budget will require sacrifices from both sides of the expense equation," but would retire the debt earlier, said Tricia Crane, a local resident.
Councilmember Gleam Davis suggested "Maybe we could pick up trash every two weeks. We might save money that way."
Sue Himmelrich, chair of the Council's Audit Committee, opposes cuts and instead advances increasing revenues as a solution. On Tuesday night she said the City should be "looking at increasing revenue not through taxes, but different emergent technologies."
City Manager Rick Cole supported Himmelrich's vision of finding "creative ideas" like looking into "the way Santa Monica can capitalize our values."
City Finance Director Gigi-Decavalles-Hughes said that given the current approach to the pension liability, by the end of the year Santa Monica will have paid $77.5 million in voluntary advanced payments, which will save the city about $6 million a year in annual contributions.
But these offsets are not enough, Decavalles-Hughes says. "Continuing along our current path will lead us to deep, structural deficits in year four and five."
Several of the folks who were members of the Compensation Advisory Committee remain steadfast in their commitment to push hard for the City to reduce the size and cost of government, especially salaries at the top.
"On June 12 the Council will conduct another public hearing and adoption of the budget for the next fiscal year. We can expect the pension burden to be a key policy topic as candidates vie for the three Council seats up for grabs in November," Crane later posted on Facebook