Page 329 - 2022-23 Blue Book Vol 2

FIRE AND POLICE PENSION FUND

BASIS FOR THE PROPOSED BUDGET

The 2022-23 Proposed Budget for the Fire and Police Pension Fund relates to current year funding as follows:

2021-22 2022-23

Adopted Estimated Proposed
Budget Expenditures Budget

$ 721,998,264 $ 721,998,000 Tax and Revenue Anticipation Notes $ 667,422,703

$ 721,998,264 $ 721,998,000 Total $ 667,422,703

The City’s contribution to the Los Angeles Fire and Police Pension (LAFPP) Fund is based on rates prepared by an
actuary and adopted by the LAFPP Board. The total contribution also includes the Excess Benefit Plan payment,
which is transferred to the Controller. The City pays for the contribution and Excess Benefit Plan through the
issuance of tax and revenue anticipation notes.

By funding the required General Fund contribution through the issuance of tax and revenue anticipation notes, the
City will be able to make the entire contribution in July 2022, rather than spreading the payments throughout the
year. As a result, the LAFPP expects to gain additional investment earnings on the payment, which discounts the
City contribution by approximately 3.16 percent. The discount reduces the required 2022-23 City General Fund
contribution to the LAFPP Fund by approximately $21.06 million. The appropriation for the payment of the principal
and borrowing costs on the tax and revenue anticipation notes is in the 2022 Tax and Revenue Anticipation Notes
Debt Service Fund. The Harbor Department and the Department of Airports transmit their contribution payments
directly to the LAFPP Fund.

The City General Fund contribution for 2022-23 will decrease by $54.58 million from 2021-22. This decrease is due
to a decrease in the contribution rate. Expressed as a percentage of the City’s budgeted payroll, the 2022-23
combined City contribution rate is 41.84 percent compared to 45.89 percent in 2021-22. The decrease in the
contribution rate is a result of a higher than expected rate of return, lower than expected Cost of Living Adjustment
increases for retirees and beneficiaries, loss layers from the June 2006 valuation being fully amortized, and lower
health premiums and subsidies. This decrease was partially offset by higher than expected salary increases for
active members and amortizing the prior year’s unfunded actuarial accrued liability over a smaller than expected
payroll.

The LAFPP System’s overall funded ratio, using actuarial value of assets, increased from 88.6 percent to 92.5
percent as of June 30, 2021 and is broken down as follows: retirement (96.8 percent) and health (64.7 percent).

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