Employee union contract is fair; council should sign it TuesdayOver the last several weeks and again Tuesday night, community activists who are concerned over Pleasanton's unfunded pension liability for its employees have been badgering the City Council to rein in the benefits. The city's unfunded liabilities now total between $121 million and $290 million, depending on whose accounting formulas are used. To start closing the gap, this citizens' group, led by businessman Bart Hughes and former City Councilwoman Kay Ayala, want a pending two-year labor contract with the union representing miscellaneous employees to be scuttled and rewritten to require more hefty retirement contributions. The contract, negotiated last fall by City Manager Nelson Fialho and the Pleasanton City Employees Association (PCEA) that represents 227 employees, is scheduled to be voted on by the City Council next Tuesday night. The city has separate union contracts with its firefighters and police.
The PCEA contract addresses pension reform by requiring unionized employees to contribute 2% of their salaries toward their pension fund, which is handled by CalPERS, the California Public Employees Retirement System. CalPERS market investments soured over the last few years in the recession and are continuing to lag in the weak recovery, placing a greater financial burden on public agencies such as the city of Pleasanton to increase their contributions to pay the pension commitments. To start closing the gap, the PCEA contract would have its members contributing a total of $722,000 annually. That's not enough given the financial perils facing CalPERS, which both Fialho and the community activists recognize.
Fialho's approach is to address the pension contribution shortfall as contracts are negotiated through the collective bargaining process, with three strategies: implement salary freezes for at least two-years (if not more) as contracts expire and/or until the economy substantially improves; implement a two-tier retiree medical system for new hires that eliminates this entitlement after age 65, which essentially stabilizes the city's future long-term liability; and, implement contributions from existing employees starting with an immediate 2% contribution initially and growing to the maximum 8% or 9% employee contribution through future bargaining efforts.
We think Fialho and the City Council are on the right track. The PCEA contract represents a good faith effort by both management and the union and a 2% contribution at the start makes sense. PCEA, unlike the firefighters and police unions, represents the lowest paid city employees who will now have two years with no increased income to handle the additional 2% deduction from the paychecks. Fialho, by the way, recently voluntarily agreed to an 8% contribution; his management teams followed by agreeing to contribute 4%. Within two to three years, everyone should be at the 8% contribution level, where they should be. The PCEA contract as negotiated is a good one and we urge the council to approve it Tuesday night.