In 1999, the stock market was booming, the California economy was booming and the pension funds managed by the California Public Employees Retirement System (CalPERS) were experiencing pension surpluses. So, in the last day of the 1999 CA legislative session SB400 was passed and Governor Gray Davis soon signed it into law. The effect of this bill was that it significantly increased the pension benefits to state workers. Most state workers could now retire at age 55 and receive 2.7% of their highest 1 year salary for every year work. (Previously they couldn't retire until age 60 at 2% per year at the average of their highest 3 year avg salary). Police and fire received an even more generous deal. They could now retire using a formula that ranged from 2.5% at age 55 to 3% at age 50. And all of these cost increases were to be covered by the "rosy" outlook of the CalPERS pension system continuing to perform at high levels. However, there was a dark side to this bill that no one talked about...IF CalPERS did not perform on managing the pension investments ran out of funds, the taxpayers would have to make up the shortfall.
This is exactly where we are today. As we all know, after 2000 the stock market plummeted, likewise investments by CalPERS sank and were no longer able to cover entitlement obligations. California tax payers have since been left holding the back to pay for this shortfall. Estimates are that California has around $500 Billion in unfunded pension promises to state works! CalPERS failed to perform, so California tax payers will now have to make up the difference.
Now the plot thickens. In addition to California tax payers having to make up the shortfall of benefits coming out of the CalPERS system, CalPERS has had to increase the contributions for working employees into the system. Currently, an example public employee contract may state that the employee is to contribute 7-9% of their salary into the CalPERS pension fund while the employee (the government) will contribute around 20% of their salary. These numbers keep going up as CalPERS fails to perform on meeting their benefit obligations.
Here's where Pleasanton enters the picture. In 2002 the city contracts with its employees were modified to reflect the generous benefit terms provided under SB400. Additionally, the city agreed to pay 100% of the "employee" portion of the CalPERS contribution. Over time, as the required CalPERS contributions have increased, the city's costs have likewise increased. One citizen has performed the research and discovered these costs to the tax payers of Pleasanton have increased from around 1% of the city's general fund budget in 2002 to approximately 18-20% in 2010. (see article here) That represents an 1800-2100% increase in cost and is obviously unsustainable!
Mayor Hosterman and the city council have acknowledge there is a problem here and claim they are taking steps to address this ticking financial timebomb. They claim to be setting up a citizens working group for the Spring time to look into the issue. However, the General Employee contract with city workers is being negotiated RIGHT NOW. The details of that contract negotiation will be made public on Dec 31st with the city council to vote to adopt later in January.
All concerned Pleasanton citizens need to urging the mayor and city council to be taking aggressive action now during this contract negotiation to ensure the outcome is fair to both employee and tax payer. They also need encouragement to be open with Pleasanton citizens on this issue NOW as to the true fiscal situation with entitlements in Pleasanton. Our elected officials have seen this problem growing over the years and have not had the courage to address the situation in a manner that is fair to both the tax payers and the unions. While we respect and value our city workers, they have enjoyed these "boom times" benefits for quite a while, and it is time for them to share in the sacrifices the rest of us have had to make in this challenging economy. It is the only solution that is fair for both sides.
Here's what you can do:
- Contact Mayor Hosterman (firstname.lastname@example.org) and the city council and let them know you are concerned and alarmed over the situation and urge them to stand up for Pleasanton's tax payers during the current contract negotiations. Urge them to be open and transparent on Pleasanton's fiscal situation regarding entitlements. Contact them at: email@example.com
- Contact your friends in Pleasanton and educate them on the situation and urge them to speak up.
The more the mayor and the council hear from citizens, the more courage they will find to do what is right for Pleasanton.
We citizens can't ignore the fiscal management of Pleasanton, or we may end up like Vallejo and the state of California in general. This is our community and we must speak up...or suffer the consequence!
It is your duty to contact those who represent you to voice your concern at: firstname.lastname@example.org
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