The City of Fresno has filed a cross-complaint against the retirement overseer for the pension system of the city’s firefighters, centering on the city’s decision to not increase its contributions to the overfunded system for the 2024-2025 fiscal year.
Fresno is accusing the retirement system of breach of fiduciary duty in violation of the California Constitution and of negligence.
Flashback: Staring down a $47 million budget deficit in the summer, the Fresno City Council reallocated $6 million in the budget that was being added to the Fire Department’s retirement system.
- That prevented the city from reducing staffing at three fire stations from four firefighters to three.
The backstory: The fire department’s retirement system is fully funded in the 2024-2025 fiscal year even with the decision to not increase the payment to the system.
- The system was already overfunded by 116%, totaling a $268 million cushion. The city contributed $36 million to the retirement system in the budget, which did not affect the cushion.
Driving the news: The City of Fresno Fire & Police Retirement System and City of Fresno Employees Retirement System filed a lawsuit against the city in September in an effort to force the city to implement the retirement contribution rate changes.
- They claimed in the lawsuit that the city is breaking California law by not paying the amount that was actuarially determined by the Fire and Police Retirement Board and the Employees Retirement Board.
The big picture: In the lawsuit, the city cited Section 3-324 of city code, which states that the city should contribute “amounts necessary” to pay all pensions and other benefits in the retirement system.
- Further, the city argues that under Article XVI, Section 17(b) of the California Constitution, the retirement boards have a duty to minimize the city’s contributions. That section reads as follows: “The members of the retirement board of a public pension or retirement system shall discharge their duties with respect to the system solely in the interest of, and for the exclusive purposes of providing benefits to, participants and their beneficiaries, minimizing employer contributions thereto, and defraying reasonable expenses of administering the system.”
- Fresno argues that the retirement boards were negligent by failing to consider the city’s budget deficit when setting the city’s contributions.
What they’re saying: “We believe the Retirement Board has acted negligently and is violating California’s constitution by breaching its fiduciary duty to minimize employer contributions to the retirement plans,” City Attorney Andrew Janz said. “It continues to be the position of the City that the City has fully funded these plans.”
