Pleasanton must trim employee benefits or face citizens' initiative, council warned
Resident cites 'exploding entitlement expense' facing city
A Pleasanton resident has asked the Pleasanton City Council to make employee pension and health care reform a top priority in 2011 or face a citizens' initiative that could force major changes in municipal employee benefit plans.
Bart Hughes, in his second appearance before the council in as many weeks, said his study of the city's benefit costs shows Pleasanton is heading toward a fiscal crisis by funding all costs of employee pension and health care contributions.
He cited an article in an October 2002 issue of the Pleasanton Weekly that reported on the city's approval of a plan giving its employees a retirement plan that would cost taxpayers $13 million over the next eight years, and $20 million over the next 20 years.
"My research has shown that the cost now is actually $97 million against that initial estimate," Hughes said, adding that this "exploding entitlement expense" far exceeds Pleasanton's ability to pay for it.
"Supposedly this is a financially responsible city and council," Hughes said. "Just recently you required the (Livermore-Pleasanton) Fire Department to contribute 2% toward health care. But that's been it. For the entire time over these eight years with this gross miscalculation, the taxpayers have picked up almost 100% of that. Employees have picked up almost none of that."
"There's been a lot of news out there with regards to the frustration that the taxpaying public has with regards to out-of-control pensions," Hughes said. "I didn't think it was happening here in Pleasanton but the more I dug into this, I've been amazed at how important this matter has become."
"Back in 2002, retirement costs were less than 1% of the general budget. Today they are 21%. So that's $16 million every year that doesn't go to the services of the city, but it goes to compensate employees. I agree that employees should be compensated, but this plan was never intended to be so generous.
"In the last election, there were 10 entitlement reform bills on the ballot. Nine out of the 10 passed. The only one that didn't pass was in San Francisco. And they passed with huge margins, 70% and up.
"But the patience is running very thin here. Something needs to be done for the sake of the future of Pleasanton residents and the future of employees. As citizens we always have the initiative process and we will pursue that if need be."
Although council members did not respond directly to Hughes, they agreed to make the process of preparing the next budget more transparent. This would include public discussions as budget data is considered, which would include employee health and pension costs.
City Manager Nelson Fialho said work on the city's next two-year budget for fiscal years 2011-12 and 2012-13 would begin early in 2011.
Hughes' plea for the Pleasanton council to take action to stem employee entitlement costs comes a few weeks after a national study found several Bay Area counties are being driven toward bankruptcy because of ballooning pension costs. Four of the 10 counties in the worst trouble nationwide are in Northern California: Contra Costa, Sonoma, San Joaquin and San Mateo counties.
The study by the Kellogg School of Management at Northwestern University found $3 trillion in unfunded "legacy" liabilities from state-sponsored pension plans. However, new research finds additional liabilities from municipalities that magnify the growing public pension crisis with an additional $574 billion in unfunded liabilities from pension plans at the city and county levels.
The paper, "The Crisis in Local Government Pensions in the United States," was co-authored by Joshua Rauh of the Kellogg School and Robert Novy-Marx of the University of Rochester.