PD Editorial: CalPERS numbers tell costly pension story
Here are a few alarming details about the cost of retirement benefits for cops and firefighters, gleaned from a California Public Employee Retirement Fund report:
— On average, local governments in California are paying 50 cents on top of every payroll dollar to cover retirement costs for public safety employees.
— Two dozen jurisdictions are paying 70 cents on the payroll dollar, twice as many as last year, and that number is expected to double again next year to 50.
— In a few jurisdictions, taxpayer contributions to CalPERS exceed payroll expenses for public safety employees.
One of the cities paying top dollar, Ed Mendel wrote at Calpensions.com, is Rohnert Park.
Sonoma County’s third- largest city is paying 110.9% of payroll in the current fiscal year to cover retirement benefits for public safety officers in its top-tier plan, Mendel reported. Rohnert Park’s obligation is set to jump to 118.9% of payroll next year, pushing the city’s annual cost to $4.5 million.
Retirement plans for police and firefighters tend to be more expensive than plans for other public employees, because of the nature of public safety work and because those employees usually are eligible to retire at any earlier age.
As we have said before, we don’t begrudge public employees for receiving pensions they worked for, and we don’t oppose retirement benefits for public employees — or anyone else.
But the rising cost of retroactive benefit increases granted in the 1990s and early 200s cannot be ignored. Most of the legislators, city council members, county supervisors and other elected officials who approved those pension increases have moved on, leaving their successors to deal with the fallout.
And, despite the steep cost increases for 1,500-plus member agencies and a decade of steady stock market growth, CalPERS is still only about 70% funded.
In a report released last year, the League of California Cities estimated that cities’ payments to CalPERS will nearly double by 2025. That, in turn, means fewer cops and firefighters and less money for parks, pothole repair and other services.
The present trajectory simply isn’t sustainable.
CalPERS acknowledges as much in its report on public safety retirement costs: “The greatest risk to the system continues to be the ability of employers to make their required contributions.”
There is no silver bullet.
CalPERS urges its member agencies to make advance payments, which can reduce future liabilities considerably. Some jurisdictions have done so, but it isn’t feasible for cities already forced to cut services or raise taxes to balance their books.
A fair solution would involve changing retirement formulas for public employees — locking into place benefits already earned while establishing a lower level of benefits going forward. This could be produced through collective bargaining, but there’s a big obstacle: the “California rule,” a disputed legal interpretation of the state constitution holding that retirement benefits, even those that has yet to be earned, cannot be reduced.
The state Supreme Court ducked an opportunity to evaluate the California rule in a case decided earlier this year. The justices will get another crack at the issue in a pending case. If they take another pass, the vicious cycle of rising costs for pensions and cutbacks for basic public services will continue to accelerate. That would be bad news for taxpayers and public employees alike.
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