Pleasanton's unfunded pension liability ranges from $290 million to $121 million depending on who is analyzing the municipal budget, with Finance Director Emily Wagner saying that the liability actually has been reduced by cost-cutting measures and other adjustments. Either way, those are big numbers and the council, Wagner and City Manager Nelson Fialho are considering measures to reduce the liability and to work with employee groups to pick up more of the costs. In recent years, the city has paid all of the costs of health care and pension for employees. That's now changing.
Recently, Fialho voluntarily agreed in a new contract to contribute 8% toward his pension. He also won an agreement from department managers to start contributing 4%. A new contract recently signed with the city employees union has them contributing 2% toward pension benefits, a rate that will go to 4% next July 1. Fialho, at the council's direction, has been negotiating a new contract with the police union that will be unveiled at the council's public meeting on Oct. 4. It is likely to contain the same provisions. At last Tuesday's meeting, labor consultants and the council weighed in on the firefighters union contract, which is nearing expiration. Those negotiations will be completed after the police union contract is signed. Last year, firefighters agreed to contribute 2% of their salaries for the first time; a larger percentage is no doubt on the negotiating table.
All California cities face a long-term challenge as pension costs continue to increase, threatening the delivery of basic public services, compromising general fund budgets, and indeed, posing a long-term fiscal challenge to the state itself. A former CalPERS pension system actuary has warned that by 2014 it will be common for local governments to budget 50% of a police officer's salary, 40% of a firefighter's salary and 25% of a miscellaneous employee's salary for their pensions, contributions that are fiscally unsustainable. Many cities already face 25% or more increases in pension contribution costs in the next three years and those rates are likely to remain high for a decade or more.
An analysis by the League of California Cities Employee Relations and Revenue and Taxation Policy Committee blames the causes of the problem on large losses in pension investments due to the recession, enhanced benefit formulas granted after 1999 by the governor and state Legislature, and the increasing lifespan of retired employees.
The Pleasanton council and the city manager, in formulating new labor contracts, have adopted the "principled approach" of the League of Cities. This states that the public retirement system should provide fair benefits for career employees. It means recognizing the value of attracting and retaining high-performing public employees to design and deliver vital public services to the community. It's a principled approach that recognizes that public pension costs going forward must be shared by employees and their employers, who, after all, are us, the taxpayers.