The San Luis Obispo City Council voted to establish a firm hiring freeze and restrict staff travel to help deal with a $1.5-million budget shortfall.
A sharp drop in tax revenues caused much of the shortfall: Sales tax receipts dropped 5 percent, and taxes on hotel customers dropped by 10 percent from the last fiscal year.
If that wasn’t enough sobering news for city residents, the city finance director, Bill Statler, told a subdued council that rising employee retirement costs could seriously hamper future budgets.
The city currently will pay an estimated $7.6 million in employer contributions to CalPERS—the state employees’ pension fund that the city uses—this fiscal year. That’s 10.7 percent of the city’s current operating budget and around 14.5 percent of the general fund. Based on 2009 compensation, the city will pay at least $2.5 million more by 2014 and, if actuarial experts are to be believed, it will likely be a far higher amount.
“There is no magic purse,” said Councilman Andrew Carter. “A dollar spent in this area is taken from somewhere else. … I have a hard time justifying the rates we have now.”
Most city police and fire personnel can retire at age 50 with up to 90 percent of their salary if they’ve worked long enough. Most other city employees can retire at 55 with a less generous pension.
Both the police and fire chief attended the meeting, as did a sizable group of firefighters.