Morro Bay’s current budget plans aren’t going cut it if the city wants balanced books in the future.

The 2016-2017 budget of $13.6 million ended with a $12,000 surplus. City Manager David Buckingham said Morro Bay is living within its means—and most importantly, the city didn’t have to cut funding to any services or programs. But that might not be the case in the years ahead, according to the budget proposal put before the City Council on May 9.

“We cannot address our fiscal challenges simply by tightening our belt here and there, we either need to increase revenues substantially, or make significant cuts to existing programs and services,” the proposal read.

The proposal suggests dropping the number of firefighters on duty from four to three; reducing night-duty police officers from three to two; a 25 percent reduction in maintenance of public facilities, parks, and streets; eliminating the teen center program; and a 50 percent funding cut for pothole repairs. That’s just a partial list of proposed cuts to services and programs before the council and community.

Part of the bleak forecast comes from the significant cost increase the city is seeing from California’s Public Employees’ Retirement System (CalPERS) over the next six years.

Buckingham said Morro Bay is seeing an escalation in pension costs of about $1.3 million, but it’s not the only local agency feeling the pinch. The city of SLO released its five-year fiscal forecast and is estimating an impact of about $3.2 million by fiscal year 2021-2022.

This increase comes after CalPERS announced in December that it would lower the expected average rate of return on pension investments from 7.5 to 7 percent over a three-year period. The lower rate of return causes an increase in what local agencies need pay in to CalPERS in order to support retirement benefits for current and retired employees.

With that in mind, the Morro Bay City Council instructed city staff to identify programs and services that could see potential funding cuts. Buckingham said in this way, the city can foreshadow where cuts might take place so the council can lead a discussion with the community.

“This will help start a conversation that says what our priorities are and what’s important, so that when we get to this point next year, we have a good community conversation on how we’re going to balance next year’s budget,” he said.

The funding cuts suggested do not affect the proposed budget for fiscal year 2017-2018.