Despite strong economic growth, the city of Los Angeles still faces a number of fiscal challenges, including rising pension costs, according to a report released Thursday by Los Angeles City Controller Ron Galperin.

“Our city’s finances are stable at this time, but we need to make sure we are adequately prepared for any economic downturn that may come,” Galperin said. “The city must remain disciplined in its budgeting, maintain and grow its reserves, and be more transparent and effective in managing its special funds. It’s crucial that we be prudent.”

The city has experienced relatively strong economic growth over the past six years, including a 4.6 percent rise in overall revenues, while overall expenses increased by less than 1 percent, according to Galperin’s Comprehensive Annual Financial Report for the fiscal year which ended June 30.

Pensions are one challenge on the horizon, the report notes, as the city spent $1.2 billion, or 13 percent of its $9.3 billion budget, on pensions in FY 2018. The cost compares to 11 percent spent 10 years ago and nine percent spent 20 years ago.

The pension systems reported being 84 percent funded for FY 2018, but the stock market has been more volatile since then, which could impact investment earnings moving forward, the report says.

Retiree health benefits are a net liability of $2.8 billion, which represents a funding level of 68 percent of overall projected obligations, according the report. The funding places L.A. in better shape than most other large cities, as New York has $98 billion in unfunded liability, and both Chicago and Houston are zero percent funded for retiree healthcare, the report says.

The city’s total debt load increased by $1.1 billion in FY18, which was mostly due to modernization projects by the Department of Water and Power and the Los Angeles World Airports, according to the report.

The report also says the city relies significantly on hundreds of special purpose funds, which are governed by rules limiting how they may be spent, and need to be better managed by departments while also more fully integrated into the city’s public budgeting process.

The full report can be found at

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