Pension reforms bode well for Pleasanton's future | May 31, 2013 | Pleasanton Weekly | |

Pleasanton Weekly

Opinion - May 31, 2013

Pension reforms bode well for Pleasanton's future

The Pleasanton City Council is likely to ratify a new three-year agreement Tuesday with the union representing 220 regular city employees that will raise individual pension contributions and reduce floating holiday hours while also granting a modest wage increases over the life of the new contract, the first pay increase these employees have had in three years. Overall, the new agreement conforms to sweeping pension changes that are already in place for unionized police and firefighters and those made last year by Governor Jerry Brown that reformed pension benefits for public employees hired after last Jan. 1. That change raised the retirement ages from 55 to 67 and trims their pension benefit from 2.7% to 2.5%. Additionally, for those employees hired after Jan 1, the city changed retirement medical benefits from two-party coverage to one-party coverage, with an additional sunset at age 65 when the employee becomes eligible for Medicare. These changes move the city closer to long-term pension sustainability as "legacy" employees eligible for benefits under the pre-2013 plan retire from the system.

It's not a perfect solution to the city's concern of unfunded liability for both the California Public Employees Retirement System (CalPERS) and retiree medical benefits that total $131 million or $162 million depending on the formula used. The $131 million follows the required reporting for accounting purposes in accordance with the Government Accounting Standards Board (GASB) and the $162 million is based on the market value of the assets. But it continues the City Council's recognition of the growing pension problem caused by both overly generous benefit awards by councils in the 1980s and an overly optimistic CalPERS that pegged its assets on every-increasing interest rates and assets. The 2008-09 stock market collapse and housing bust exposed the structural vulnerabilities of California's public pension systems and the risky political behaviors that led to the growing retirement obligations for the state and local governments, including Pleasanton's, the scale of which are now recognized and being addressed.

Pension benefits promised to retirees are irrevocable, as are the promised benefits that current workers have accrued since their employment began. So employees should be credited with agreeing to boost their individual pension contributions. Doing nothing could cost public employees everything since a pension cannot grow without a job attached to it. Although Pleasanton continues to be fiscally strong with sizable reserves, other cities are already seeing diminishing resources as their pension costs soar. The Little Hoover Commission in its study of California public pension systems warned that government budgets are being cut while pension costs continue to rise and squeeze other priorities.

Arguably, some will say that Pleasanton is not doing enough to reduce its unfunded pension obligation. But with city employees contributing a full 8% of their wages starting Dec. 31 and police and firefighters agreeing to contribute 9%, the city is moving in the right direction toward a retirement system that, coupled with reduced obligations for new employees, can eventually be sustainable. Much also depends on CalPERS and its ability to make realistic assumptions and a state legislature that will hold the line on pension formulas now in place to trim both payroll growth and continue the two-tiered pension reforms both Pleasanton and the governor have made.


Posted by Bart Hughes, a resident of Another Pleasanton neighborhood
on Jun 1, 2013 at 4:22 pm

PW - your incomplete and often times factually incorrect coverage of this issue has become so tiresome. This community deserves much more than this.

- Where is your acknowledgement of the Council's commitment to reduce the deficit by a measly 10% over five years and the fact that it has gone in the opposite direction?

- Where is your coverage of the fact that now that CALPERS is finally being forced to be honest with its numbers, the deficit is likely to grow in the coming years regardless of market returns?

- If you actually took two minutes to review publically available information, you'd recognize how foolish your statement that 1980's give-aways are one the major causes the current predicament. The irresponsible actions happened in the early 2000's and were derivative of SB400.

- All the major contract sacrifices affect future employees and current employees who are benefiting the most and contributing the least to fix the problem. It sounds like current employees are doing a lot, but they aren’t.

- Etc., etc., etc.

Your, the Council's and City Management's continued soft peddling of this issues guarantees at least three things:

- Newer employees will continue to be shafted to protect the multi-million dollar retirements of older employees

- City services will continue to subtly erode (e.g. how many more years will we have to navigate pot hole infested Johnson drive?)

- City management and Councils will look for ways to increase revenue through further burdening of citizens and businesses

- The problem will continue to grow

Just think of what might have happened if you had focused a critical eye on this issue years ago instead of naively swallowing the half-truths that city management and Councils spoon fed to you.

Congratulation - you are now officially part of the problem. Way to leave Pleasanton a better place for future generations – NOT!

Posted by john, a resident of Another Pleasanton neighborhood
on Jun 1, 2013 at 6:28 pm

"Newer employees will continue to be shafted to protect the multi-million dollar retirements of older employees"

Do you have any more information on this? I didn't even know it was going on. Are newer hires getting different pension arrangements than older ones? That very thing happened with federal workers starting around 1983. It did substantially reduce federal pension liabilities, but at the cost of less generous pensions for workers hired after the change.

Posted by resident, a resident of Another Pleasanton neighborhood
on Jun 1, 2013 at 8:17 pm

Very well stated Bart! Wish you would run for City Council so we would have somebody there is not afraid to say what needs to be said.

I do not know why we are offering raises at all to employees on the platinum retirement system. We should be computing the fully burdened costs of an employee on the platinum standard and the costs for a new hire. Existing employees should not be given raises until the fully burdened cost of their job is the same as new employees. Or give them a choice to go to the new employee retirement plan. So give raises to new employees on the new retirement plan but the existing employees on platinum would not receive it until their complete employee costs is the same as new employees.

Posted by PW gets it wrong, a resident of Another Pleasanton neighborhood
on Jun 2, 2013 at 9:00 am

The Sacramento Bee reports: CalPERS board OKs accounting changes hiking pension costs (by as much as 50%)

“Leaders of the California Public Employees' Retirement System voted this afternoon to speed up payments on the fund's long-term liabilities with an accounting change that will trigger higher contributions of up to 50 percent from taxpayer-funded state and local governments and school districts over the next few years.”

“The accounting changes won't hike what employees in pay toward their benefits … it's left to employers -- and by extension, taxpayers -- to fill that gap with more money for CalPERS to invest…. For example, CalPERS estimates that pension contributions for state workers and school-district employees who aren't teachers will grow from about $5 billion to $7.5 billion over five years (and that doesn‘t include the increased contributions for County‘s, Cities, or special districts (including school districts)).”

Not mentioned in the article are two other rate raising items that CalPERS will review later this year: Mortality rates and their discount rate. If they determine that life expectancies are increasing the rates will rise to reflect longer and, therefore, larger total pension payouts. CalPERS is also planning to consider lowering the discount rate from 7.5% to 7.25%. Both items threaten to raise employer contribution rates even higher.

Pleasanton City management seems to be ignoring the reality of what’s coming.

Read more of the article here: Web Link

Posted by Mary, a resident of Country Fair
on Jun 2, 2013 at 9:32 am

PW gets it wrong,

So the question is where is the money going to come from and from whom? I find it hard to believe that you can get taxes any higher in this state in the current economy. This last tax increase, prop 30 has caused several of my clients to sell their homes and leave.

Several weeks ago I was on a flight from SFO to Boston and sat next to a woman who told me that she was an accurarel sic and they had just met with Jerry Brown and told him that they education fund would be bankrupt in 7 years, finished. His response was that he would not be in office then.

Posted by resident, a resident of Another Pleasanton neighborhood
on Jun 2, 2013 at 1:28 pm

The overpaid pension issue could kill the state. There are three alternatives to fixing it:
1) Raise taxes where the additional income will go only to the pension system.
2) Keep cutting services and laying off current employees since there will be little funds available after paying the pensions of those who have retired.
3) Have the unions bargain in good faith, knowing the additional benefits given around 2000, and made retroactively, are unsustainable and based on false information saying that the additional benefits would not cost us anything.

#3 will never happen. Unions job is to get the most for their members without morals.

#1 will cause more people to start to leave the state. Actually it will be those making decent incomes that will be leaving. That leave the state with people who currently now do not pay much or any state taxes. That will cause California to spiral down.

#2 will result in the same problem as #1. Services such as road repair, police, fire, and teachers will mean less safety and poor education. Those with money will leave the state to those who do not pay much or any taxes.

The current legislature will not do anything now however. They will leave it to future legislatures. They want to keep spending so their union supporters get getting our tax money, which means continued union support for their future campaigns.

The current union leadership will do nothing because they have locked in benefits.

The only solution, that I see, is for an initiative on the ballot that requires that the true actuarial cost of benefits be computed today (none of this false discount rates) and you cannot give a benefit that is not 100% funded when the benefit is earned. This will force agencies to deal with the problem now but it gets more difficult in the future if nothing is done. Another idea is the initiative does not allow ANY new program that costs money in the agency until this is taken care of. No more pet projects.

Posted by Arnold, a resident of Another Pleasanton neighborhood
on Jun 2, 2013 at 4:53 pm

I agree with Bart Huges and the other truth tellers, especially Mary. The politicians are liars. The unions are liars. The workers are liars. Calpers and Calstrs are liars. Let me ask you: Would you rather have workers promised a certain salary/pension (they are one and the same) and who made life plans accordianly) suddenly have to downgrade their expectations, sell their homes, etc.; or would you rather have the potholes of Huges' Johnson Drive get repaired? Such is the choice. And I'm here to tell you. I've been seated in the crow's nest for sometime now. Johnson Drive is crumbling right under our feet because the earth is shuddering in anticipation of an upcoming volcanic eruption that will result in fantastically huge waves, and one Big one, a tsunami, that will take everything with it. We can't raise taxes on the hard-earned investment earnings and inheritances that distinguish us from the peons who serve us and think they deserve to make over 100 grand a year. Heck, that's almost 30% of what Bart and me make! I ask you, do they deserve it?
Like I say, the tsunami is out there, and its just a matter of time before first Johnson, then Hopyard disintegrate under our tires.

BTW Far more businesses are coming into the state than are leaving it. Why? They're not reading the same tea leaves Bart and me are. Go figure!

Posted by registered user, Kathleen Ruegsegger, a resident of Vintage Hills
on Jun 2, 2013 at 6:42 pm

Here is the post about CalPERS Web Link

And here is the one about CalSTRS Web Link

Both are from the CalPensions site. It's going to be expensive.

Posted by Message to: Kathleen, a resident of Another Pleasanton neighborhood
on Jun 2, 2013 at 7:03 pm

I have a great deal of respect for your opinion. So I'm asking this question, what is your take on Pleasanton city managements efforts to control pension costs?

Posted by Arnold, a resident of Another Pleasanton neighborhood
on Jun 2, 2013 at 10:21 pm

(Post removed by Pleasanton Weekly Online staff as redundant by same poster.)

Posted by Arnold, a resident of Another Pleasanton neighborhood
on Jun 3, 2013 at 7:24 am

Redundant? That's a new one!

Posted by registered user, Kathleen Ruegsegger, a resident of Vintage Hills
on Jun 3, 2013 at 7:35 am

I can agree with the article that the efforts are a step in the right direction, both by the city and CalPERS. But when PERS is believing it will reach full funding in 30 years, that's at a glacial pace, and with a lot of assumptions that include the performance of their portfolio. Bart Hughes and resident already point to many other concerns.

The Tri-Valley TImes' Daniel Borenstein also has covered the topic of pensions in depth, as was mentioned on another thread recently. This is an article from April: Web Link

Posted by Arnold, a resident of Another Pleasanton neighborhood
on Jun 3, 2013 at 10:25 am

Okay, I've got it. The liberal elitist unions must have complained about us freedom fighters who want to protect our youngsters and their youngsters from the unionist tactics that keep our fellow Pleasantonians oppressed. Nor does it help that the editors belong to the liberal mainstream media that wants to shut up freedom fighters like Bart and Kathleen and Me.

What remains among our foremost concerns is the condition of Johnson Drive which shouldn't be made to crumble just because the city is expected to honor its contractual obligations with the big bad public workers. That's just union strong arming tactics that are going to hurt our kids Big.

I must say I'm disappointed in the editors. A couple of rich liberal union sympathizers bark a little -- well a lot with phone call after phone call -- and the liberal press Jumps. What does this mean for our BMW and Bentley driving youth in the future? How can they enjoy their cars with potholes in the road thanks to our greedy union elitists who, unlike wealthy folks, just Refuse to Give It Up!

Posted by registered user, Kathleen Ruegsegger, a resident of Vintage Hills
on Jun 3, 2013 at 10:57 am

Arnold, what is it you really believe? Is there a problem? Do you have ideas about solutions (if you see the problem)? Is it okay to pass the debt down the line? You write at length; perhaps you could frame the issue from your perspective.

Posted by Arnold, a resident of Another Pleasanton neighborhood
on Jun 3, 2013 at 12:04 pm

The problem is the uppity unionists who want to take our big houses away, as you know Kathleen. They do it by making us pay taxes for their services. Where it gets really problematic is when they expect the city to honor contractual agreements, or when they think they deserve to get raises every three or four years. We live in an affluent city with million dollar homes, and the thought of you, Kathleen, and Bart and Me having to pay higher taxes in order to forestall endless road repairs on Johnson Drive is just very very difficult to stomach. So, the only solution is to proclaim that there isn't tax revenue available to keep these upstart workers and their families in their extravagant apartments and townhomes. "Higher taxes means rich people will leave and rich people won't come to our community. Just look at current home prices and availability!" Its all about freedom, our freedom, freedom of the wealthy to live in comfort without having to think about these noxious workers who claim to deserve a certain standard of living. And freedom to flood newspaper sites without the liberal effete elitist mainstream PW press censoring all of us wealthy citizens.

Posted by registered user, Kathleen Ruegsegger, a resident of Vintage Hills
on Jun 3, 2013 at 12:44 pm

In other words, IF there is a problem, the "the rich" can/should be taxed to fill the hole (ignoring that taking all their money is still not enough). Got it.

Posted by resident, a resident of Another Pleasanton neighborhood
on Jun 3, 2013 at 12:45 pm

I think Arnold is stating that he is a socialist and feels those who work hard and have been successful should give their spoils to some of the workers. No sense in working hard or taking as you will end up with the same amount of money as somebody who has not taken the risks or worked hard. It is not fair that somebody who is an owner of a company and works 100 hours per week, much of the time out of town away from their family, possibly for several years of not getting a salary until the company is a success, should make more money than the person who cuts the grass of the parks.

So instead of the government workers working for the residents/taxpayers, he wants us working for the government workers. The government workers will let us know how much of our money they get. Hum, sounds almost like how the mob was run...

Posted by Arnold, a resident of Another Pleasanton neighborhood
on Jun 3, 2013 at 1:04 pm

Wowsa! Now that's what I call reasoning! Kathleen is worried about public workers taking "all her money" until there isn't any more for all the rich people. Because rich people already give until it hurts, as every loose bit of pocket change becomes a source of great consternation. We can use it as a rallying cry: "Public workers taking ALL OUR MONEY till we the wealthy don't have any more!" Perfect logic, coming from a great thinker. Mitt Romney couldn't have said it better!

Resident is concerned that a living salary/pension for public workers amounts to government socialist mob rule. It begins when workers ask for a raise, and will not end until all those hard-working investors and inheritors have to forfeit Everything. Workers' raises equals socialism. Wikipedia tells us that.

I feel so simpatico with both of you! In fact, I'm going to share something that I wouldn't ordinarily do. I saw a kid drop a quarter right in front of Peet's, he looked for it for a few seconds, but didn't find it. What say, Kathleen, Bart, resident, that quarter's still there. Have at it! (Before you know what washes it away!)

Posted by registered user, Kathleen Ruegsegger, a resident of Vintage Hills
on Jun 3, 2013 at 1:22 pm

"Having paid your fair share" is fluid and is eternally just beyond current intake.

Had I been there and a child dropped a quarter, I would have pointed it out or picked it up to return it to him/her.

Posted by Arnold, a resident of Another Pleasanton neighborhood
on Jun 3, 2013 at 5:07 pm

Kathleen says, "Having paid your fair share is fluid and is eternally just beyond current intake." Perfect! In other words, let's not worry about fairness if it involves those lowly sorts who have designs on taking it ALL away from Bart, Kathleen, Me, and others.

And "...I would have pointed it out or picked it up..." I guess you would have had to have gotten on your hands and knees looking for it. Oh, never mind. I was hoping you'd be able to read what I wrote. Again overestimated you. Still, glad we're in agreement on this!

Posted by registered user, Kathleen Ruegsegger, a resident of Vintage Hills
on Jun 3, 2013 at 5:24 pm

Here's what you wrote: "I saw a kid drop a quarter right in front of Peet's . . ." no mention of obstacles to prevent returning the quarter.

Define fair.

Posted by Arnold, a resident of Another Pleasanton neighborhood
on Jun 3, 2013 at 6:06 pm

You're playing dumb with the quarter example, Kathleen, but since you're on my side, I'll forgive you. No need to be truthful or honest when there is so much at stake -- after all, public workers are threatening to take it ALL away from us.

Define fair? Fair, in keeping with your own logic, is preventing others from taking Anything for fear it will lead to them taking Everything away from us. Just like the great Mitt Romney said: "I legally pay my 13%; those who pay higher must be suckers; but any attempt to make me pay more than that is unpatriotic; for before you know it, 14% will become 97%. The whole enchilada!"

So, let's continue to be the freedom fighters we are, protecting Bart Hugehouse and all the rest of us from those parasitic teachers and other public servants who, if you don't watch the silverware, will take ALL of it. And no new taxes, because it goes against our libertarian principles and, besides, the Founding Fathers were against taxing the rich. Not to mention money better spent on fixing the potholes on Johnson Drive.