City manager briefs council on CalPERS outlook; unfunded liability payment and possible legislation spotlighted

City Manager Alexander Henderson delivered the city’s annual CalPERS funding update, outlining how investment returns, actuarial assumptions and benefit design drive employer contributions. Henderson said CalPERS investment performance has improved assets (presentation cited assets rising from about $507 billion to about $563 billion across recent reporting periods) and that CalPERS’ discount rate is currently 6.8 percent.

Henderson explained the city’s employer contributions consist of a normal cost (a percentage of payroll) and an unfunded actuarial (UA) amortization payment. He said Kingsburg contributes the employer share based on hire date and benefit tiering and noted the city has used strategies such as setting aside surplus into a UA fund, prepaying UA in July and making discretionary payments to reduce long-term interest costs. Henderson said lump-sum UA payments and discretionary prepayments have produced estimated interest savings (the presentation cited roughly $1.8 million saved over the life of required payments due to additional discretionary payments).

Henderson read a UA figure for the coming year and said the lump-sum UA payment is expected to be about $964,000 this year, roughly a 50 percent increase from two years prior. He also summarized pension-reform history (PEPRA reforms enacted for new hires in 2013) and told council there is pending legislation being tracked that could roll back parts of those reforms and potentially increase costs; he cited an initial CalPERS estimate (presented in the briefing) that such changes could add roughly $9 billion in system costs over 20 years.

Council members asked whether AB 1383 would take effect July 1 and how it might affect local finances; Henderson said the bill was not far enough along to take effect July 1, details remained unclear, and that any changes that permit lower retirement ages or expanded benefits would likely be subject to bargaining at the local level.

Henderson said the city will await updated actuarial documents in June 2026 and continue to evaluate contribution requirements for the next budget year.