Discussion and possible action to approve a budget amendment and lump sum payment in the amount of $6,000,000 from the General Fund Contingency to the Public Safety Retirement Accounts.

Consistent with state law, the city of Peoria participates in the Public Safety Personnel Retirement System (PSPRS) for all sworn police and fire personnel. Due to numerous factors inside and outside PSPRS, the pension found itself significantly underfunded. PSPRS is analyzed both as a consolidated plan (known as an agent-multiple employer) and as individual plans for each employer agency (Peoria Police is separate from Peoria Fire). As a consolidated plan, PSPRS is 65.3% funded as of June 30, 2022, up from 54.2% funded as of June 30, 2021. Individually, the Peoria Police pension plan is 76.4% funded as of June 30, 2022, up from 58.5% the prior year, and the Peoria Fire pension plan is 77.1% funded as of that same date (up from 71.5% the prior year). As a PSPRS participant, Peoria must be fully funded (100%) by 2036. Based upon actuarial assumptions this will require a total of $270 million in contributions between 2020 and 2036 to achieve.

In order to reduce this total contribution amount and achieve full funding sooner than 2036, Mayor and Council approved a $30 million lump sum payment to PSPRS in September of 2021 and $5 million lump sum contribution in May of 2022. These payments, in addition to the Annual Required Contribution (ARC), have accelerated the pay down of unfunded liabilities. Overall, the Police and Fire plans are anticipated to be fully funded 5-7 years ahead of schedule and save approximately $55-$75 million in contributions.   

In Fiscal Year 2023, investment returns are unlikely to reach the PSPRS  new, lower, assumed rate of return of 7.1%.  Therefore, an additional lump sum contribution this fiscal year will assist the payoff schedule.  Staff proposes a $6 million lump sum payment to PSPRS to be shared between the Police fund and the Fire fund.

This payment is intended to increase Peoria Police and Peoria Fire pension assets and reduce unfunded liabilities.

Mayor and Council adopted Resolution 2022-48 on May 17, 2022 regarding a pension funding policy and is scheduled to update that policy at this same meeting of June 6, 2023 under the Consent Agenda.

Mayor and Council received and discussed a presentation regarding a paydown strategy for the PSPRS unfunded liabilities at its September 14, 2021 study session. This body approved a lump sum payment for $30 million at its September 28, 2021 regular meeting and a policy of holding the Annual Required Contribution (ARC) constant at the FY23 level until full funding is achieved. Mayor and Council then approved an additional $5 million payment in June 2022. 

Approve a budget amendment totaling $6,000,000 from General Fund Contingency to the Public Safety Retirement Accounts within the respective funds

This request will use available funds in excess of required reserves in the General Fund. The city has seen the balances in these funds grow considerably in recent years as a result of conservative budgeting and better-than-expected revenue collections. The use of these funds to pay down Peoria’s PSPRS unfunded liability will leave sufficient fund balances to address the city’s one-time needs going forward.