There is one other very positive impact that flows from the reduction in the unfunded pension liability, namely a corresponding reduction in the annual required employer contribution made to CALPERs.
I have attached the calculation of the required CALPERs contribution the Town must make for FY 2024. As you can see the amount expressed as a percentage of payroll dollars is 29.97%. Assuming a projected payroll of $13,004,007 that would equate to a total dollar payment of $3,897,300. That’s real cash being spent.
As a result of the ADP and the strong market growth, the Town receives the benefit of lower required annual UAL payments which is offset by an increase in the normal costs percentage. The normal cost is increasing from 9.7% in 2019 to 11.42% in 2021.
At the end of the day, the total required CALPERs payment for FY 24 has been reduced by $576,007 simply because the Town reduced the unfunded pension liability.
I doubt that there is any other line item expenditure in the FY 24 budget that will reflect that large of a decline. Said another way, this real expense savings (budget vs actuals are not real savings in the terms of spendable savings) can be reallocated to other pressing needs such as increased spending on fire prevention or can simply remain unspent and applied to the reserve balance. This is the power of paying down unfunded pension liabilities as opposed to raising taxes.
Again, I want to thank the Finance Commission for supporting the LGCA effort in getting the Town to address this situation. This is a big win for all residents!
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