The economy is doing well and tax revenues are rising – so why are three of San Diego’s largest government agencies facing massive hits to their bottom lines?

The city of San Diego estimates it must slash $47 million to $67 million in spending, San Diego County may have to cope with $100 million in new costs and San Diego Unified is staring down at least $124 million in cuts – an especially dire challenge because the reserve fund has nothing to spare.

Some of their troubles are common.

First, all three agencies are dealing with rising pension costs. State and local pension fund leaders are reducing long-term earning expectations, which increases the amount of money employers must contribute to fulfill retirement promises for current and former employees.

Traditionally, when things don’t pencil out it’s the employer – also known as the government or taxpayers – that are ultimately on the hook to cover losses. In contrast, city of San Diego employees hired after 401(k)-style pension reforms were enacted in late July 2012, except for police, just get less in retirement.

Lowering expected returns also increases each agency’s unfunded pension liability, or the gap between the cost of what’s been promised and what’s in the bank.

Longer life expectancies are having the same negative effect. People are living longer, and drawing pension checks longer than once anticipated. This increases employer costs and needed contributions.

Other factors contributing to the budget crunch are more unique to each agency.

Here is a closer look:

City of San Diego

In November, the city was projecting a $37 million shortfall next year. The city’s independent budget analyst more recently put the deficit at $57 million, which included “critical strategic expenditures” inexplicably left out of the earlier forecast in a departure from previous practice.

Since then, the city’s pension payment grew by another $10 million annually, so the deficit now stands at $47 million to $67 million, or nearly 5 percent of the city’s $1.4 billion general fund next year.

More than anything else, rising pension costs are hurting the city’s bottom line.

In total, annual pension costs will increase by $63.4 million next year to $324.5 million. Most of the increase – about $47 million – will come from the city’s general fund. To put the impact in perspective, without the pension increase, the city’s general fund deficit next year would be $20 million at most.

Current city officials have pledged to never again deliberately underfund pensions – a practice that once made the city infamous nationwide – so the higher costs will be paid and the money to do so must come from somewhere else.

Though the city’s tax revenues are rising, they’re not rising fast enough to cover the added costs.

Property tax revenues are expected to exceed estimates this year by nearly $1.3 million, but sales tax revenues are lagging behind by more than $1.3 million, according to the Mid-Year Budget Monitoring Report released last month.

Hotel tax revenue growth is also lagging, with officials now expecting nearly $900,000 less this year than what was included in the budget.

It’s unclear if this year’s tax trends could impact next year’s expectations.

Property tax revenues were previously forecast to bring in $532 million next year, nearly $29 million higher than newly revised estimates for this year. Sales tax revenues were expected to total less than $271 million next year, $700,000 lower than current year estimates and hotel tax revenues were anticipated to total $120 million next year, $7.6 million higher than current year estimates, city records show.

What tax revenue gains do exist are not all up for grabs, either.

A portion of the city’s tax revenue increases are now restricted for infrastructure needs, thanks to a measure approved by voters in June 2016.

Proposition H is expected to render $17 million untouchable for other budget needs next year, city records show, but it’s possible some city maintenance costs currently paid by the general fund could be shifted to the infrastructure fund.

To help close next year’s $47 million to $67 million budget gap, all city departments were asked to identify cuts totaling 3.5 percent for next year. If all suggested cuts were enacted, savings could total $45 million, per the independent budget analyst.

On Monday, the City Council will vote on whether to slow down plans to reach minimum 16.7 percent general fund reserve levels recommended by the Government Finance Officers Association. The move could free up $3 million annually over the next five years.

More will be known about what will get cut when Mayor Kevin Faulconer releases his proposed city budget by April 15 and a revised budget in May. The budget will be sent to the Council for approval in June.

San Diego County

County leaders have long touted a healthy reserve fund and stellar bond ratings as signs of financial health. That hasn’t changed, but state and federal actions outside of their control could bring new costs to the county budget.

Supervisor Dianne Jacob said in her State of the County address Feb. 1 that the county “may be looking at a $100 million hit to our budget.”

Jacob’s office said the $100 million figure referred to a possible $75 million cost increase if the Affordable Care Act is repealed and local residents lose insurance. The expectation is that the county will have to provide medical care to masses of newly uninsured residents.

“An early estimate is the county, who has responsibility for indigent health care costs, could be faced with $75+ million in increased medical costs for people who lose their health coverage under the Medicaid expansion of ACA,” county spokesman Michael Workman said in an email.

The remaining $25 million cited by Jacob refers to Gov. Jerry Brown’s proposed decrease in state funding for in-home support services, which provides home help to low-income residents who are elderly or disabled.

Whether either impact becomes reality next year remains to be seen, but Jacob seems to think there’s a real chance supervisors will have to come up with $100 million more than anticipated.

That may result in cuts to other services, or using money in the reserve fund.

Already anticipated in the $4 billion budget are rising county pension contributions, expected to increase from $394 million this year to nearly $469 million next year. The county spends another $81 million annually to pay off pension obligation bonds, loans the county obtained a decade ago to make pension contributions.

San Diego Unified School District

The amount of budget cuts needed at San Diego Unified is rising, with the latest staff estimates after the governor’s state budget topping $124 million.

Budget documents show school officials plan to outspend general fund revenues this year by about $100 million – more than any other year in recent history. In recent years, the district relied on its reserve fund to help cover funding gaps, causing it to dwindle to minimum 2 percent levels required by the state.

The district must grapple with cuts to its $1.3 billion general fund budget even as costs for pensions and other employee benefits are rising.

Contributions for teacher pensions totaled nearly $125.5 million this year and will increase by $10 million next year. Contributions for non-teaching staff pensions totaled nearly $37.5 million and will increase by $3.2 million. Even steeper increases are needed in future years.

Revenue increases from the state are slowing a bit faster than expected after years of large cash infusions following implementation of the new Local Control Funding Formula. The formula sent more money to districts like San Diego Unified that have large populations of English-learners, students from low-income families and other vulnerable students.

Exactly what will get cut next year will be approved by the school board Feb. 21, but school sites have begun circulating notices indicating the district plans to cut nearly all vice principals at elementary schools. The school district declined to confirm or deny whether that was true earlier this week.

For some, like Ellen Browning Scripps Elementary, lunch and recess supervision is being reduced from 44 hours to 16 hours a week, while the school’s library position will be reduced to one day a week, according to a message from the school’s principal. Counselor hours will also be trimmed.

In a message sent out on social media Tuesday, Superintendent Cindy Marten pledged to “not increase core class sizes,” and to “cut from the top first.”

“Where layoffs are necessary, we will work to make their transition smooth,” Marten wrote, adding that the district is also exploring early retirement incentives for long-time educators.