Since 2002, the unfunded portion of the city's promised retirement benefits have more than tripled. Petaluma will pay $5.3 million for pension costs this fiscal year, and next year its obligation is projected to increase to $5.7 million.
CalPERS — the state's public employees retirement fund — is cautioning that the economic recession and stock market volatility will impact future employer rates. It is likely that the city's unfunded percentage will increase in the next couple of years, as happened immediately following the last crash in 2002 and 2003.
City Manager John Brown said Petaluma expects a "slight increase" in the city's pension cost next year and noted that "rate smoothing" techniques adopted by CalPERS have helped rein in costs for cities.
"They do what they can to provide us with rate stability," he said. "It's an expense we can't avoid, so we budget for it."
Meanwhile, the cost of the city's two-pronged pension plan — one for police and fire employees, the other for so-called "miscellaneous" workers — continues to grow.
Cities and CalPERS track pension costs through several figures, including the "unfunded liability" associated with each retirement plan and the percentage of each plan that is funded.
Unfunded liabilities are the amount of promised pensions that exceed what cities, employees and CalPERS earnings can afford at any one time. They are calculated on an annual basis, but are a means to monitor how cities are doing in dealing with their pensions costs — not an immediate debt that must be paid, CalPERS officials said.
In Petaluma, the unfunded liability of the city's pension plan stands at $28.5 million as of the 2007-2008 fiscal year, the latest date for which figures are available.
That means the city's current pension plan value — approximately $181 million — is about 84 percent funded.
That "funded status" is how cities track their progress in paying pension costs, said Ed Fong, a CalPERS spokesman.