FY 2018-19 and 2019-20 Adopted Operating and CIP Budget

210.00

205.00

202.75

200.00

196.00

196.00

195.00

193.50

195.00

189.00

190.00

187.50

185.00

182.00

180.00

177.10

174.00

175.00

169.50

168.85

170.00

165.00

160.00

Employee Pensions The City provides retirement benefits to its employees through the California Public Employee Retirement System (CalPERS). Like most California cities, Morgan Hill provides a defined benefit pension to its employees. Furthermore, a new State law known as PEPRA (Public Employee Pension Reform Act), became effective in January 2013 and changed CalPERS pensions for “new employees”. Since the majority of Morgan Hill’s employees are not impacted by these changes, any cost savings will be realized over time as new employees, who are not current CalPERS members through another public agency, join the organization. Currently, 45 full-time employees (or 23% of the approved full-time positions) are classified as new employees for pension purposes. This is up from 29 full-time employees, or 16%, two years ago. On December 21, 2016, the CalPERS Board of Administration voted to lower the discount rate, or assumed rate of return, from 7.5% to 7.0% over the next three years. The last time the discount rate was reduced was 2012, when it was lowered from 7.75% to 7.5%. The change in the discount rate will result in significant increases in required contributions phased in over five years, beginning FY 2018-19.

28 RECOMMENDED BUDGET MESSAGE