This article (Fullerton adopts belated balanced budget with service cuts, jobs freeze – Los Angeles Times) in the Daily Pilot got me thinking about the struggles that many cities are facing.
Over the 5-year period from 2020-2025, inflation in Southern California totaled nearly 20%. Inflation, or the increase in the price of goods and services over time, is the single biggest factor in the growth of employee salaries.
And, this isn’t just a California anomaly: The rate of inflation in the Dallas Fort Worth area was in excess of 20% over that same time.
During the aforementioned time period, many agencies utilized one-time federal and state stimulus funds, as well as growth in online sales during the pandemic, to bolster employee salaries and keep pace with inflation. The pandemic and related stimulus is now well behind us, and online sales have flattened.
Simply put, agencies are struggling to balance their budgets and maintain infrastructure – all while funding critical positions.
A Section 115 trust is a financial vehicle used to prefund OPEB and Pension obligations by taking advantage of the greater diversification and management of plan assets available under Section 115.
Often overlooked are the benefits that a 115 trust provides when agencies are experiencing some level of financial distress.
For example, A PARS 115 Trust allows agencies to withdraw funds to make CalPERS payments with no penalty. This can reduce operating expenditures without having to reduce personnel.
Similarly, a 115 Trust can be critical to building public trust and transparency that an agency is being a good fiduciary, which is particularly important when trying to obtain voter approval for revenue measures.
Think of it this way: We all know that it is never too early for any individual to start saving for retirement. Even a small amount deferred over an extended period of time can make a huge difference when invested properly.
A PARS 115 Trust works the same way for local agencies and should be a mandatory part of any fiscal toolbox…now more than ever.
About the Author
John Gillison
Senior Consultant & Retired City Manager
John Gillison is a Senior Consultant at PARS with nearly four decades of California local government experience, including more than 25 years in City Manager’s Offices and 14 years as City Manager for the City of Rancho Cucamonga. Throughout his career, John has developed extensive knowledge of municipal operations and a strong understanding of the fiscal and operational challenges facing California cities. He has also held numerous leadership positions with statewide public agency organizations, including serving as President of the Cal Cities City Managers Department. John holds a Master of Public Administration and Juris Doctor and is a licensed California attorney.
Learn more about John and other members of the PARS team on our Who We Are page.