Generous public employee entitlements that were voted in during the 1999-2002 timeframe (based on Senate Bill 400) were not supposed to cost taxpayers extra, or in the case of Pleasanton, not much extra. However from 2002 to 2010, Pleasanton's entitlement program has cost $97 million, nearly four times the original estimate. Today, Pleasanton spends $17 million per year on entitlements compared to less than $1 million in 2002. Entitlement costs now represent 21% of the General Fund vs. 1% in 2002 and are crowding out other spending. In addition, the Pleasanton's retirement funds are significantly under-funded by $138 million (not including police).
Unfortunately, things are going to get worse. The California Public Employees' Retirement System (CalPERS) investment returns' assumptions are being revised down. And employer contribution rates must go up to compensate for the losses in 2008-09. CalPERS /cities are stalling to adjust but even CalPERS admits that contribution requirements will go up starting 2012.
Pleasanton picks up both Employer and Employee contribution portions and the city's taxpayers have picked up 100% of cost overruns to date. Except for the small portion that the fire department began contributing to last month, employees have contributed 0% to date.
The City Council and city management have had multiple opportunities these past eight years to fix the problem in a way that is fair and equitable to both employees and citizens. This was an issue well before the most recent financial crisis; however, the city's lack of meaningful action has meant that taxpayers continue to pay for the planning mistake. Employee compromises negotiated to date pale in comparison to what other cities have achieved.
City employees deserve to be fairly compensated, but not in a way that puts Pleasanton in financial jeopardy. Public employee compensation, when all benefits are included, exceeds what most equivalent private employees receive. For example, every $50,000 final salary increment for a retiring 55-year-old employee represents over $1.3 million in retirement benefits. As we bid fond farewell to retiring employees, we are essentially sending them off as millionaires. The current program is simply not sustainable.
I value the services that city employees provide to our community. However, I am not supportive of a program that will continue to financially starve the city. We need to find a new approach based on sound financial assumptions that is fair to all stakeholders -- current and future residents, plus current and future employees. I hope that in January 2011 with the new employee contract, the City Council and city management will find the resolve to come up with a solution that is best for all citizens of Pleasanton.