News from SCTA

Latest SCTA Newsletter: Page one California government pensions are pricey, study finds May 05, 2011 11:33:00 PM - By Adam Weintraub - Associated Press SACRAMENTO — California's state and local government workers make salaries similar to those at large private-sector employers but get significantly higher retirement benefits, a study issued Thursday concluded. Teachers, however, make far less after retirement than other public employees in the state. The conclusions were part of a report by consultants hired by the California Foundation for Fiscal Responsibility, a nonprofit involved in research on pension reform. The group shares roots and some advisers with an organiz tion preparing a statewide ballot initiative that seeks to force changes in government pensions. The study found taxpayers spend roughly three times what large private employers spend per employee for pensions and retiree health benefits. The gap is far smaller for teachers, and costs are lower for public workers who do not spend their entire career in government. Public pensions have been the subject of hot debate across the nation, with critics arguing the plans provide richer benefits, guaranteed by taxpayers, than other workers get. Although pension funds have gained back some of the deep losses suffered during the recession, the plans remain underfunded by billions of dollars, and projections show costs to governments increasing in the future as more baby boomers retire. Capitol Matrix Consulting looked at retirement benefits based on current value for both the public systems and several large private employers, assembling data that could be used to compare different sets of benefits, said Michael Genest, a former state finance director and now a principal with the consulting firm. "There's no question that there's a funding problem," Genest said. The new study provides hard data that can inform the debate on solving pension problems, he said. "The rationale for generous public pensions used to be that public employees accept lower salaries, but that doesn't withstand scrutiny any longer," Marcia Fritz, president of the California Foundation for Fiscal Responsibility, said in a news release. She said a state constitutional amendment aligning public and private retirement benefits will save billions of dollars that could be used to support education, public safety and other government services. The state's largest pension fund and a coalition of retired workers and public-employee unions quickly raised questions about the study. The California Public Employees' Retirement System was not allowed to review the report before it was issued, said chief executive officer Anne Staussboll. "What we have seen reported raises significant policy and legal questions." she said. The consultants said they did not review the legal issues involved in changing pension benefits for workers already in the system, as proposed this year in a report by California's Little Hoover Commission. They also acknowledged the difficulty of comparing public and private sector jobs because some government jobs, such as firefighter or prison guard, have few exact private counterparts.They also said they concentrated on comparable jobs and accounted for the higher concentrations of highly educated managers in the public sector. Californians for Retirement Security, a coalition representing public employees, called the study fundamentally flawed. "The report is a political document that relies on outdated and skewed data that provides an inaccurate view of retirement benefits for public employees," spokesman Steven Maviglio said in a statement. Sutter County budget woes could mean layoffs (seems like we told you so!) March 07, 2011 10:35:00 PM - By Ben van der Meer/Appeal-Democrat The first tangible signs of Sutter County's budget woes for 2011-12 have appeared, with some employees receiving notices last week saying their jobs may be subject to a layoff. County officials said they'd stress the letters employees received aren't actual layoff notices, but a heads up on what's possible if county supervisors vote for 20 percent cuts to departments that receive General Fund money. Shawne Corley, Sutter County's assistant county administrative officer, said there are too many variables to say exactly how the county's budget problems will play out, though she said layoffs are likely. The county has a structural deficit of $14.3 million for 2011-12. "This is something that's really new for Sutter County in the last few years," she said. "It's going to be difficult to avoid layoffs entirely." Gary Stucky, executive director of the Sutter County Employees Association, said he wouldn't go that far yet, describing himself as an optimist. "I'm hopeful the employees are receiving these notices but the layoffs won't be necessary," he said, adding if job losses do happen, at least employees have some time brush up their résumés and get their finances prepared. The administrator's office asked those department heads who get General Fund money to prepare their budgets with a 20 percent cut, Corley said. But the calculus isn't the same for all departments, because some only receive a percentage of their funding from the General Fund, and so they're determining the cut based on that percentage, not their overall budget. "Some departments won't have any reductions," she said. Stucky said he believes smaller departments, with less budget flexibility, are more at risk for reductions. The 20 percent cut is based on what's expected to be the disparity between revenues and expenditures on the start of the new fiscal year July 1, assuming everything else remains the same. But if those revenues come in higher, or lower, or the state's budget situation is resolved in an unexpected way, the situation could be different. Corley said regardless of what happens at the state level, the county is obligated to begin budget planning now. The number of wild cards in the situation make it hard to know what to expect exactly, Stucky said. "I'm still optimistic the people in charge of making decisions in Sacramento make the right decision," he said. County officials posted an explanation of Sutter's budget situation, including frequently asked questions, on the county website Monday. Corley and Stucky said they didn't know how many employees received the possible layoff letter, which employees received Friday. Pensions emerge as key issue in state budget March 06, 2011 11:10:00 PM - By Don Thompson Associated Press SACRAMENTO — A partisan split over how to change California's massively underfunded pension systems is playing an increasingly prominent role in the debate over Gov. Jerry Brown's plan to fix the state's woeful budget. Democrats, who control both houses of the Legislature, have scheduled votes this week on the governor's plan, which balances deep spending cuts with an extension of tax hikes enacted two years ago. Brown wants lawmakers to call a special election in June to ask voters for a five-year extension of the higher personal income, sales and vehicle taxes passed in 2009, raising about $9.2 billion a year. Lawmakers also will vote on $12.5 billion in spending cuts, including reductions in welfare, social services and higher education, as the second leg of the Democratic governor's plan to bridge the state's nearly $27 billion budget deficit. The governor also has proposed about $3 billion in other solutions, including changing part of the tax structure for businesses, repealing the tax benefits associated with local enterprise zones, and shifting money between various state accounts. Brown and Democratic leaders said they are willing to bargain on pension reforms to get the four Republican votes they need — two each in the Assembly and Senate — to reach the two-thirds vote threshold for placing a measure on the ballot. Republicans so far have refused to support the tax extensions. They say the state must first make fundamental government reforms, led by restructuring a pension system filled with benefits that disappeared long ago for most the private sector. "We have an unfunded pension liability of massive proportions, and we have got to get a handle on this pension crisis," Sen. Mimi Walters, R- Lake Forest, said after a committee hearing on the state's pension system last week. "We're going to have to have major reforms. We have to look at the whole, entire pension system." Walters has introduced a series of bills seeking various changes.The California Public Employees Retirement System has at least $75 billion in unfunded pension liabilities. The state also faces nearly $52 billion in unfunded retiree health care benefits. Costs to the state general fund also are projected to rise, especially with the expected wave of baby boomer retirements. Neither the state Department of Finance nor the Legislative Analyst's Office has projected how much of the state's general fund might be consumed by pension payments in the years ahead if no changes are enacted. But local governments provide an indication: According to the Little Hoover Commission, a state auditing agency, one-third of Los Angeles' operating budget could go to paying employees' retirement costs by 2015. In San Diego, it could be half of general fund spending by 2025. City officials told the commission that the payments already are sapping money from other services and forcing the closures of libraries, community centers and swimming pools. Republicans' concerns were bolstered last month by a Little Hoover Commission report that recommending freezing pension benefits for current employees. The shift would face major legal hurdles, said commission executive director Stuart Drown. But he warned lawmakers that targeting only future employees, as previously has been proposed, will not lead to sufficient savings to prevent pension payments from eating into vital public services. Public pensions "have become a vehicle for wealth accumulation," Drown said. "Benefits at this point are too generous." The comment was criticized by Democratic lawmakers, pension system operators, and representatives of public employee unions. Democrats and labor leaders concede there are abuses and that steps must be taken, through collective bargaining with public employee unions, to limit the long-term liabilities. But they argue the payouts generally are reasonable. The average pension from the California State Teachers' Retirement System is less than $40,000 a year, the system's chief executive officer, Jack Ehnes, said. The average from the California Public Employees' Retirement System is $27,000 a year, and 78 percent of the system's retirees receive $36,000 a year or less, said chief executive officer Anne Stausboll. Those figures, however, can be misleading, in part because they include people who have been retired for many years and earned far less during their career than more recent retirees. A 30- year employee who retired in 2009 averaged more than $66,000 in annual payouts, while many others have annual pensions in six figures. People who worked for state government for 30 years and retire today at age 63 will be paid 75 percent of their highest salary each year for the rest of their life, according to the Little Hoover Commission report. With Social Security, the report said, the employee will earn more in retirement than when he or she was working. "We're talking about employees who have dedicated their careers to serving the public," said Stausboll, who heads the nation's largest public pension fund, with 1.5 million members. Absent a sweeping agreement with Republicans, the chairmen of the Assembly and Senate pension committees said they intend to focus on ending some of the worst pension abuses that drive up costs and liability, rather than making major changes. That includes ending "pension holidays," in which contributions to pension funds are allowed to lapse during good economic times; "double- dipping," in which retirees receive more than one pension; and "pension-spiking," which inflates payouts by boosting a retiree's salary near the end of his or her career. "We know that pension reform is needed, but we don't want to throw the baby out with it," said Assemblyman Warren Furutani, D-Lakewood, chairman of the Assembly Committee on Public Employees, Retirement and Social Security. They have plenty of pension reform bills to consider, including 10 from Walters, who is vice chairwoman of the Senate Committee on Public Employment and Retirement. Her SB520 would put new public employees into a 401(k)-type defined contribution retirement plan similar to that offered to most private-sector employees. It's a variation on the Little Hoover Commission's recommendation that the state convert from its current defined benefits plan to a hybrid model that would include something similar to 401(k) plans. Here are some other pension bills lawmakers will consider in the coming weeks: • Pension plans would be required to save for future retiree health care benefits under Walters' SB521. • Walters' SB522 would prohibit state employees from increasing their pensions by buying extra years of service they did not actually work. • She proposes to end pensions for part-time, locally elected officials under SB523. • Her SB524 would prohibit granting retroactive pension benefit increases. • The minimum retirement age would increase to 55 under Walters' SB525. • She would prohibit "pension spiking" under SB526 by requiring that state employees' pensions be based on a three-year average salary before retirement, rather than the single highest salary. • Walters' SB527 would end collective bargaining for pension benefits by public employees, with the exception that bargaining could continue over the amount employees will contribute to their pension plans. Assemblyman Allan Mansoor, R-Costa Mesa, has a similar bill, AB961. • Elected officials would no longer serve on the CalPERS board under SB528. Walters argues they have a conflict of interest because they help set their own pensions. • CalPERS' reporting requirements would be changed under SB820. Walters contends current requirements allow the funds to present an overly optimistic investment picture. • Public employee pension systems would be required to file disclosure reports annually to the Legislature for retirees earning more than $100,000 annually, under SB689 by Sen. Tom Harman, R-Huntington Beach. • Public officials and employees would forfeit their pensions if they are convicted of a felony connected with their professional duties, under SB115 by Sen. Tony Strickland, R-Thousand Oaks. The measure responds to the pay and benefit scandal in the Southern California city of Bell. ____________________ Our View: Watchdog's pension fixes seem reasonable Appeal-Democrat staff report - 2011-03-01 22:13:47 Suggestions for curbing the escalating pension costs of government workers are coming from many sectors, some with axes to grind or constituencies to protect. But the state's independent watchdog Little Hoover Commission has proposed a comprehensive package with much about it to like. The commission is an independent oversight agency whose record has been solid to excellent, giving it credibility in a highly politically charged atmosphere. For starters, the commission has urged the governor and Legislature to establish legal authority for state and local governments to freeze pension benefits for current workers. If runaway pensions are to be reformed, they must first be prevented from getting worse. The commission, in a report last week, didn't stop there. Going forward, the commission recommended that current workers should accrue benefits under more sustainable plans. Payments to current retirees would be unaffected. We agree that existing contractual obligations for benefits already earned should be met, if at all feasible. But scaling back future earned benefits — at least those guaranteed by taxpayers — is absolutely necessary. As commission Chairman Daniel W. Hancock noted, governments cannot solve the pension crisis "without addressing the mounting pension obligations of current employees." The commission report, "Public Pensions for Retirement Security," recommends a "hybrid" model combining "a lower defined-benefit pension formula with an employer-matched and risk-managed defined-contribution plan." We would like to take this further. Ultimately, we believe a defined-contribution, 401(k)-type plan is the ideal. Much of the private sector recognized this many years ago. Guaranteed payouts risk fiscal calamity when the economy and tax revenue softens. Uniform standards should be adopted for the 85 defined-benefit pension plans in California, the commission recommended. Among suggested standards are: • Capping in the $80,000 to $90,000 range the maximum salary for calculating benefits. • Changing eligibility ages so early retirement is not encouraged. • Requiring employees and employers to share pension funding costs. • Re-defining final compensation to prevent "spiking." • Reducing the number of "holidays" when employers or employees do not pay into the funds. • Banning retroactive pension increases. • Improving accountability and transparency. These are reasonable recommendations. It's shameful it took a watchdog agency to propose them rather than the elected officials with first- line responsibility. What's worse is that it's taken a veritable crisis to propose what should have been the rules all along. New labor contract would save Sutter County $3.6 million March 01, 2011 11:51:00 PM - By Ben van der Meer/Appeal-Democrat Sutter County supervisors took a step toward addressing problems with the county's much criticized pension plan Tuesday, but received little in the way of cheers on either side. By voting to change the formula for when and how much employees in the county's largest bargaining units receive and pay toward their pension, supervisors saved the county $3.6 million in employee costs through 2013. But members of the Sutter County Taxpayers Association told supervisors the savings meant little when looked at in the total deal employees in the General, Supervisory and Professional bargaining units received in the 5-0 board vote. "There is very little saved in this provision because the county is giving a raise, and the employees are using the raise to pay their increased share," said Pat Miller, SCTA president. "This is no time to be granting wage increases." Under the plan, employees under those contracts will pay 8 percent if classified as miscellaneous, or 9 percent if they're in public safety, toward their pensions. Employees will be able to offset the cost through raises of 2 percent in 2011, 3 percent in 2012 and 1.5 percent in 2013. As well, the plan creates a second tier of pensions for new employees, where those in law and fire units can receive 2 percent of their pay for every year they worked at age 50, down from the 3 percent now. New nonsafety employees will receive 2 percent at age 60, as opposed to the 2.7 percent at age 55. The approved memorandum of understanding also eliminates a 3-percent increase that was scheduled to go into effect last year for most employees. About 630 employees were affected by Tuesday's vote. Combined with earlier MOUs with sheriff's deputies and firefighters, the total employee savings for the county are more than $5 million. While saying they still thought more could be done, some supervisors said the new contract terms move in the right direction. "I think the board recognized this is something they had to address now," said Chairman James Gallagher. "That's part of the bargaining process, that you're never going to get everything you want." But in pointing to projections showing unfunded obligations for state pensions in the future, Miller and others said the county hadn't gone far enough. "In 2004, we warned against these pensions, and we were ignored," said Elaine Miles, of the SCTA. "We owe the employees fair pay. Fair. But also sustainable benefits." Miller said with a projected 2011-12 deficit of more than $14 million, the county should explore rolling back pensions for all employees, but Gallagher pointed out state law kept the county from doing so. Sutter County Administrative Officer Stephanie Larsen said she would also point out the units affected by Tuesday's vote discussed the changes to their contracts voluntarily. Yvonne Jackson, a county employee, said critics of the pension plan don't take into consideration the total financial picture for workers like her. "A lot of us took a tremendous loss in pay to work for the county," she said, adding she works two jobs to make ends meet. County officials are discussing pay and pension changes for employees in the confidential and management units, with new deals expected in the next few months. ____________________ So what has the SCTA been saying all along? Appeared in Appeal-Democrat 2/19/11 As department heads in Yuba and Sutter counties prepare their 2011-12 budgets, the economic outlook for each is headed in a different direction than in recent years. While Yuba County's General Fund may get into the new fiscal year with a negligible deficit, Sutter County is looking at an estimated deficit of $14.3 million in 2011-12. The result is a request for Yuba department budgets next year to be in line with the current year, while Sutter department managers are asked to cut 20 percent for the fiscal year beginning July 1. Sutter County Supervisor Jim Whiteaker said he expects cuts, though how severe they will be won't be clear until the proposed budgets are submitted. "I always want to make sure we're not making a lot of cuts in public safety," he said. Both counties received mid-year budget reports at their board meetings earlier this week, with a few actions taken by Yuba to keep a rein on finances. There, supervisors approved eliminating three vacant positions in Health and Human Services, hiring three others at lower salaries and laying off two employees in building inspection. The board also approved $5.1 million in budget transfers, including tapping into contingency funds for $271,049. In both counties, the cause of budget woes is largely the same: shrinking revenue. While Yuba saw slight gains in sales taxes, secured property taxes and franchise fees compared to the same quarter in 2009-10, those amounts were flat or down year-to-year for Sutter. And lurking over both counties' budgets is the state's budget deficit, at more than $25 billion. Though Gov. Jerry Brown has proposed moving programs from the state to the counties, supervisors in Yuba and Sutter are skeptical they will get the money to pay for those programs. "If they don't give us the ax too badly, I think we'll pull through," Supervisor Hal Stocker said at Tuesday's meeting during the mid-year budget presentation. "The question is, what will the state do to us?" Yuba County Administrator Robert Bendorf noted that 46 percent of the state's deficit could be tied to county budgets. Whiteaker said state uncertainty is also a concern for Sutter. "A lot of times before, I've said the state is a bad business partner," he said. For both counties, there is little officials can do but budget conservatively, wait, and hope. Yuba College district chancellor Harrington announces retirement January 20, 2011 12:03:00 AM - By Ben van der Meer/Appeal-Democrat Yuba Community College District Chancellor Nicki Harrington announced her retirement Wednesday, saying it made sense to step down at the end of the academic year, a year before she had originally planned to do so. Harrington, who came to the district in February 2002, said her decision had nothing to do with either the community college budget crunch, or controversy about her pay raises. "We've got the accreditation for both colleges coming up," Harrington said after the board of trustees' meeting. "Basically, this is a time of transition." Trustees said they weren't hugely surprised by her announcement, though board President Xavier Tafoya said he didn't think it would be so soon. "She rescued the college and put it back up on its feet," said Tafoya, a trustee since 2000. "It's one success story after another." The timing of her retirement, Tafoya said, may give Harrington a chance to help her replacement get up to speed before the new school year begins this fall. Because the average college chancellor stays 51/2 years, he said, the district already had her for longer than normal. Trustee Ben Pearson said he wa n't surprised by the announcement because of the tough fiscal times higher education is facing in California. "With the past year being what it has been, it doesn't seem surprising," Pearson said. He, too, credited Harrington with leaving the college in better shape than she found it. Both trustees Brent Hastey and Gary Sandy praised Harrington's tenure. "She wasn't run out of this town. The board would happily keep her if she was staying," Hastey said. "She's making a good, rational decision for the college." But Lisa Jensen-Martin, president of the Yuba College Faculty Association, said many in her association would be happy to see Harrington leave. "The news will be well received throughout the district community," Jensen-Martin said. "It will provide a clean slate and a chance to heal and rebuild." Jensen-Martin and other faculty members heavily criticized Harrington and the board in the last year after trustees approved two pay raises for the chancellor. The first one was later rescinded. The second raise of $15,000 brought her salary to $232,429. Hastey said he couldn't say whether the raise helped Harrington boost the pension she will receive in retirement, a practice sometimes called spiking. "I don't know enough about the pension system to give an answer to that," Hastey said. In a statement announcing her retirement, Harrington listed several accomplishments during her tenure, including initial accreditation for Woodland Community College in 2008, voters passing a $190 million facilities bond in 2006 and revitalization of the YCCD Foundation. "I will miss the Yuba Community College District's teaching and learning environment as I embark on new challenges in the next phase of my life," she said in the statement. Sandy, a new trustee, said the board would meet with a recruitment firm next month to begin the process of finding a replacement for Harrington, possibly as soon as this summer. "We'll go into the community and ask them what they want to see from a chancellor," he said. "The board sees this as one of the most critical decisions we can make." ____________________ Sutter County's pension debt escalates Pat Miller - 2011-01-30 17:06:21 Pat Miller is president of the Sutter County Taxpayers Association. Sutter County's pension debt grew $16.2 million in fiscal year 2008-09 according to the California Public Employees Retirement System annual actuarial retirement report issued in November 2010. The debt went from $52 million on June 30, 2008 to $68.2 million on June 30, 2009. In just eight years, Sutter County has gone from $28.8 million in the black to $68.2 million in the red — a minus $97 million in its CalPERS funding. Following is Sutter County's pension debt history: • June 30, 2001: Sutter County had a surplus of $28.8 million • June 30, 2002: Sutter County's surplus dropped to $6 million • June 30, 2003: Sutter County owed $11 million to CalPERS • June 30, 2004: Sutter County's debt increased to $31.4 million. Sutter County increased its CalPERS payment formula from 2 percent at 55 to 2.7 percent at 55 — a 35 percent retroactive increase (safety employees' retirement went to 3 percent at 50) • June 30, 2005: the debt grew to $36.7 million • June 30, 2006: the debt grew to $36.8 million • June 30, 2007: the debt grew to $44.8 million • June 30, 2008: the debt grew to $52 million • June 30, 2009: the debt grew to $68.2 million Remember, the $68.2-million debt is as of June 30, 2009, not 2010, so expect another increase when the CalPERS report is issued in October 2011. For fiscal year 2010/2011, the county is paying $10.5 million to CalPERS. Next year, Sutter County will pay $12.5 million, with over $5 million of that in interest alone. The percentage rate for miscellaneous employees jumps from 17.305 percent of payroll this year to $21.1 percent of payroll next year. The rate for safety employees goes from 25.077 percent this year to 30.9 percent in 2013/2014. Those figures do not include employee contribution rates of 8 percent miscellaneous and 9 percent for safety. Safety employees recently started paying their 9 percent. The county continues to pay the 8 percent miscellaneous contribution pending negotiations with miscellaneous and management employees. Warnings of severe financial troubles due to government pension debt have been strongly and repeatedly sounded throughout California and the nation for the past several years, but action to address government pension debt has been slow. Sutter County has made some initial progress to reduce its pension costs, reaching agreements in December and January with safety employees to 1) change the retirement formula for new safety employees to 2 percent at 50 (existing employees remain at 3 percent at 50); 2) basing retirement pay on the average highest three years' pay; and 3) requiring new and existing safety employees pay their 9 percent contribution to CalPERS which was previously paid by the county. Agreements with the miscellaneous employee and management groups — the bulk of county employees — remain to be negotiated. The Sutter County Taxpayers Association encourages the county to quickly reach agreements with the remaining employee groups and to seriously look at increasing the full retirement age for miscellaneous employees from the current 55 to 62 years or older. The retirement age for safety employees should also be raised from 50 to at least 55. Last April, SCTA encouraged the county to look at pension obligation bonds to reduce the 7.75 percent interest we are paying to CalPERS. Using a 4 percent interest cost, we estimated the county could have saved close to $8 million from 2003 through 2008. Since then bond interest rates have increased, but taking out bonds should still be strongly considered. The necessity for meaningful and aggressive corrective action cannot be more apparent. Citizens, please take the time to demand that your supervisors — who already have us deep into a financial hole — stop digging. ____________________ There will be more . . !