The City of Santa Barbara is staring at $344.5 million in unfunded pension liabilities, and city officials behind the scenes are scrambling to find the money to pay.

“None of our pension plans — for police, fire and others — are fully funded,” Finance Director Keith DeMartini said.

DeMartini and Dan Matusiewicz, a consultant for GovInvest, made a presentation recently to the city’s three-member Finance Committee, outlining the scope of the problem.

“Generationally, for me, I really struggle often with conversations about unfunded pension liabilities,” said committee member and Councilwoman Meagan Harmon. “It feels so much to me like a problem not of my own making, and sometimes I just want to run screaming in the other direction.”

Santa Barbara and most cities and counties throughout the state have been trying to get a handle on their pension liabilities for the past decade. Then-Gov. Gray Davis in 1999 signed SB400, which gave public safety employees, including prison guards, park rangers and CHP officers, grandiose retirement benefits. Local governments followed suit, offering the ability for public safety employees to retire as early as age 50 and the ability to obtain up to 90% of their highest salary in retirement.

Those benefits are known as defined, and the employee is guaranteed that retirement income, even if CalPERS struggles.

“Pension costs are squeezing out some valuable program costs,” DeMartini said.

The 2008 recession hammered the nation and CalPERS. Pensions are paid out by government agencies and employees, along with returns on CalPERS investments. When those investments tanked during the recession, government entities started to pile up massive pension liabilities.

Santa Barbara will pay out $32 million in pensions in 2022, and that number is expected to reach $38 million in the next few years.

The city has little control over how to make up the gap. In some cases, it negotiated with labor and public safety unions for their employees to pay toward their pensions. In return, however, those unions often negotiate higher salaries.

The city is looking at strategies to pay the unfunded liability, but there are no easy choices. Further exacerbating matters is the complexity of the options, with elected officials not always possessing the financial expertise to necessarily understand the correct route to take.

The Finance Committee, and eventually the full City Council, will have to decide which options to take to help stabilize the situation.

Among the options on the table is pre-paying the annual pension liability, to receive a 7% discount, a tactic that the city has used previously.

The city also could create a Section 115 Trust, which essentially sets aside money in its own investment plan that could create a greater return than CalPERS. A trust is a common way that local governments tackle their pension problems.

The city also could issue bonds to help cover the pension costs.

In Santa Barbara, about 55% of pension payments are paid with investment earnings through CalPERS. That number used to be as high as 70%. City employees contribute between 6.75% and 13%. If investment earnings go down, the city must figure out a way to pay the rest.

Committee member and Councilman Eric Friedman said he appreciated the presentation, adding that he was leaning toward creating a Section 115 Trust over issuing bonds, as to “not trade one liability for another.”

Harmon said the city has a long way to go before it solves the problem, but it is headed in the right direction.

“I do see this as an opportunity to truly set up future generations much better than we have been and to really try to resolve some of these big questions that I think are weighing on all of us,” she said. “I really want to make sure that our employees our valued and respected, and that the unfunded liabilities are not dealt with on the backs of employees alone.”

Noozhawk staff writer Joshua Molina can be reached at Follow Noozhawk on Twitter: @noozhawk, @NoozhawkNews and @NoozhawkBiz. Connect with Noozhawk on Facebook.