Pension benefits burden Rohnert Park
As specter of bankruptcy looms over city, generous pension plan for public safety officers stands out as major strain on budget
By JEREMY HAY
THE PRESS DEMOCRAT
Published: Saturday, March 27, 2010 at 3:00 a.m.
The shadow of Vallejo — which declared bankruptcy in 2008 under the weight of police and fire pay and pension benefits — looms uncomfortably near Rohnert Park these days.
Falling sales- and property-tax revenues, and the state’s decision to take back more than $4 million in redevelopment funds, have left “The Friendly City” at the edge of a fiscal cliff. It projects it will run out of cash in 14 months.
Against that backdrop, and after a year of service cuts and employee layoffs and buyouts, Rohnert Park’s expensive employee retirement plans stand out as a major strain on the city’s finances.
While three of the city’s unions agreed this year to concessions that will roll back their pensions to 2006 levels, the powerful Rohnert Park Public Safety Officers Association did not.
“It’s the 500-pound elephant in the room,” Councilman Jake Mackenzie said of the city’s pension plan costs.
In the 2003-’04 fiscal year, the city’s payments into the California Public Employees’ Retirement System were $1.8 million. In the 2008-’09 fiscal year, CalPERS costs to Rohnert Park were $5.4 million, a 196 percent increase over five years. Part of that jump was because the number of people the city employed rose over that period. However, since July, the city has laid off or bought out 27 employees.
The public safety union argues that because of the demanding nature of public safety work, its benefits — which allow officers to retire with up to 90 percent of their salary — are needed to recruit good officers to a city now in dire straits, and where they must be able to perform both police and fire duties.
“Who’s going to come and work here if you cut their benefits,” said Dale Utecht, president of the union. “What kind of officers are you going to get in the future?”
Also, union members note, government employees retiring with public pensions do not get the Social Security benefits that people who retire from private industry have earned.
Fiscal emergency
How dire is Rohnert Park’s fiscal crisis? Even after $4.8 million was cut from this year’s $26.5 million budget, it faces a projected deficit of about $6 million for the next budget year, which begins in July.
City leaders have declared a fiscal emergency and are now seeking voter approval in June of a half-cent sales tax measure, even as they acknowledge it would only cut the deficit by $2.8 million at most.
The “plan,” such as it is, said finance director Sandy Lipitz, “is to buy enough time so that the economy will improve.”
Vice Mayor Gina Belforte said: “If the tax measure doesn’t pass, and the economy doesn’t improve, then we are in some serious, serious trouble, close to Vallejo, very close — and I’m not trying to do fear-mongering.”
The cost of public employee pensions has emerged in increasingly stark terms as budget crises have deepened for cities around the state. In Rohnert Park — which projects it will spend $3.8 million of its $8.9 million in reserves this year — the impact of the plans on city coffers is particularly clear.
“They’re definitely a problem,” said John Neiman, a senior fellow and expert in local government at the San Francisco-based Public Policy Institute of California.
“The main reason is the downturn in the economy. What’s happened, of course, is that over the years we have local officials who are very shortsighted,” Neiman said. They committed “to pension benefits that are overly generous, but didn’t seem to be at the time because the economy (was) humming along.”
Unforeseen circumstances
Rohnert Park’s current pension plans were approved in 2004. Two of the five councilmembers that signed off on them remain on the dais, Mackenzie and Amie Breeze.
Mackenzie was the sole “no” vote back then; Breeze says she believes she voted correctly, believing that development — including a proposed casino — would have happened by now and would have been producing revenue.
“It was something we needed to do at the time in order to continue the solvency of a good department,” she said. “And unfortunately some of those things we had planned on haven’t come to fruition, and we didn’t have a crystal ball to be able to see that.”
Representatives of the public safety officers association, or POA, say that the pension improvements were earned in lieu of raises.
“The membership has always felt — with justification — that all PERS enhancements were bought with raises they didn’t get,” said Dave Stubblebine, a retired officer who now consults with the POA and took part in the latest contract negotiations.
The increase took effect in 2007, making Rohnert Park the last city in the county to adopt the increased benefit levels. It was following the lead of cities and counties around the state, which were in turn following in the steps of the state, which approved the increases in 1999.
Remaining competitive was a key at the time, said former Councilwoman Vickie Vidak-Martinez, who supported the benefit increase.
“We were struggling to recruit for our public safety department, and that was during the time that we just began to have a lot of retirements of veteran officers, and we had to fill those positions,” she said.
She said she received assurances from then-City Manager Carl Leivo that the city could afford the increase, based on projected growth and tax revenue.
“It’s a vote I’ve always regretted,” she said last week.
Leivo was out of town and could not be reached for comment, his wife said Thursday. He also did not return an earlier call seeking comment.
The 2004 contract with public safety employees allows sworn personnel to retire at age 50 with up to 90 percent of their salary. Other city employees got increases allowing them to retire at 55 with up to 81 percent of their salary depending on the number of years they worked. The contracts were similar to those being handed out around the state.
The benefits were retroactive, too, which means the city has had to pay more into the system to cover the cost of increased benefits for people employed for years under a lower-cost retiree plan.
City pays officers’ entire share
To pay retiree benefits, and to prepare for future retirements, the state’s Public Employees’ Retirement System collects premiums that are a percentage of each employee’s salary from the city and invests them.
While the employee’s share of the premium remains the same from year to year, the employer’s share changes based on factors including the number and age of employees and the rate of return of CalPERS’ investments. Those investments, many of them based on real estate, have tanked since the economy slid into recession.
Under Rohnert Park’s contract with its 61 sworn public safety employees, the city pays the officers’ entire 9 percent employee share.
Santa Rosa, for example, does the same — but the practice isn’t uniform. In Petaluma, public safety personnel pay their own share.
Schwarz said he applauds the POA for the concessions they’ve made to date — furloughs that amounted to 9 percent pay cuts this year and about 6 percent next year, for a total savings of $592,000.
But, he said, “were our employees to pay for more of their pensions, there’s an immediate relief to the city in terms of our budget challenge.”
Rohnert Park’s 99 other non-sworn employees pay a percentage of their employees’ share; in most cases, 7 percent of a required 8 percent. Twenty-six public works employees, who negotiated a raise in their last contract, pay 7 percent of their 8 percent premium.
Schwarz and Public Safety Director Brian Masterson voluntarily agreed to pay their own share of pension premiums.
A political bind
The difference between how premiums are paid puts the council, and perhaps the POA, in a political bind.
“I think what people struggle with is that the city pays both employer and employee shares” for POA members, said Belforte. “There’s a disparity between some of the union groups, that’s what people struggle with.”
Utecht said the nature of public safety officers’ work outweighs the pension issue in the public eye.
“I would say that when the majority of the public has an emergency and calls for a police officer, firefighter or emergency medical services, they do not care what our pension benefits are,” he said. “They want someone to run toward the gunshots, into the burning home or to stop the bleeding, and they want that done as quickly as possible.”
In the case of police officers, the difference in contracts means the city has to annually pay CalPERS an amount equal to 43 percent of each officer’s salary. That makes the average salary and benefit package for an officer $145,492, said Sandy Lipitz, the city’s finance director.
That amount doesn’t include overtime pay, which the department has cut dramatically this year, Lipitz said.
In contrast, for other city employees, the city pays an pension premium amount equal to 25 percent of their annual salary. The average non-sworn employee’s wages and benefits cost the city $83,627, Lipitz said.
Here’s what the pensions costs have meant to Rohnert Park in dollar terms:
The enhanced plans cost the city an additional $1.5 million a year starting in 2007.
Since 2007, the city’s public safety-related pension costs have risen by 57 percent. Pensions costs for non-sworn, or miscellaneous, employees have jumped 51 percent.
As of July 2008, Rohnert Park’s unfunded liability — the difference between what it’s paid into the system and what it will owe based on current actuarial figures — was $45.5 million, up from $30.6 million the year before. The latest figures aren’t yet available.
Something has to give
Without exception, city officials acknowledge that the benefits weigh heavily on the city’s tattered finances.
“They are a burden, no doubt about it,” Councilman Joe Callinan said, speaking specifically about the public safety employees’ pension benefits.
Asked whether the city will press to reopen contract negotiations to try to get benefit concessions, Belforte said: “If the sales tax measure doesn’t pass and the economy doesn’t improve, everything is on the table.”
In that event, pressure likely will be focused on the more expensive public safety department benefits, in part because the other unions’ plans already have been rolled back.
Had the officers association agreed to the same rollback, “That would have been a solution that would have eliminated a lot of other things that we’ve had to deal with in terms of budget problems,” said Mayor Pam Stafford.
Two-year contracts for all the unions were signed only months ago. And any negotiations can only be reopened with the union’s consent. That’s something the POA may be reluctant to do.
“I don’t know how the officers will feel about that,” Utecht said. “Our membership would have to vote on that and agree to it.”
“I don’t know how we’re going to wrestle with it,” said Councilwoman Amie Breeze, who added she is unlikely to support unilateral efforts to enter into negotiations again.
The public safety officers contract “has to be reopened and it has to be looked at,” Mackenzie said.
That’s easier said than done.
“You’re obliged under the contract to serve them out, and unfortunately those aren’t always timed to meet the needs” of a city in a budget crisis,” said Neiman, of the public policy institute.
“You just have fewer options in how you manage those things in the short run,” he said.
You can reach Staff Writer Jeremy Hay at 521-5212 or jeremy.hay@pressdemocrat.com
originally published at: pressdemocrat.com