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Municipal budgets in California are experiencing significant new stressors. As cities and counties work to provide equitable access to public programs, address the growing homelessness crisis, and deal with the many other challenges facing their communities, public agencies are again forced to spread limited budget dollars across more programs. To top it off, state and federal pressure on local governments is never-ending, requiring improvements on infrastructure repair, social support services, and so forth. All of that without adding enough funding for existing budgets — let alone new programs and services.

There is just not enough money. Or is there?

California cities experienced volatile tax revenues during the COVID-19 pandemic with some stability on the horizon. One-time funding from legislation, such as the CARES Act and American Rescue Plan Act, provides an opportunity for public agencies to create long-term sustainable financial solutions. So how do you leverage one-time funding to sustain long-term new costs? First, you have to look at the most significant budget issue that municipalities in California face: unfunded liabilities.

Put plainly, unfunded liabilities such as post-employment benefits (OPEB) consume a significant portion of the annual budget for public agencies. This is an area where one-time funding can help the most. State and federal funds can be used for programs and new services, providing public agencies a chance to focus their general fund dollars on paying down debt, including OPEB liabilities.

Contribute to future retiree benefits fund

The smartest (and unfortunately least-used) solution for easing budget burdens from OPEB costs is to contribute to a fund dedicated to paying future retiree benefits. AP Keenan’s MuniMET program has helped public agencies pre-fund their OPEB liabilities, freeing up significant budget dollars for critical existing and new programs for those districts.

AP Keenan’s MuniMET program is maintained by world-class professionals from Benefit Trust Company and Morgan Stanley and includes access to six different investment portfolios that have met or exceeded their targeted rates of return consistently, as opposed to other pre-funding options in the marketplace. This puts the control back at the local level. Instead of waiting for the state to come up with a cure-all solution, this is a solution that can be realized now, and controlled at the local level.

For more information on AP Keenan’s MuniMET program, please contact Gail Beal at (800) 344-8507, ext. 3602, or by email at gbeal@keenan.com.