Reining in Pension Costs

City investigates CalPERS benefit costs

Alameda's city leaders are in the midst of a fresh effort to address this city's pension costs.

Top city staffers have said they expect the city's pension costs to continue to rise, even as employees have offered to pay more toward their retirement. City Manager John Russo has assembled a task force to study the city's pension and retiree health care cost issues. A report is due out sometime this fall.

While Alameda's city leaders said they can't ask current employees or retirees to accept slimmer benefit packages, over the last year all the city's employee unions have agreed to allow their members to pay more toward their pensions.

Contracts with the city's nonsafety unions are expected to produce $873,000 in pension and benefit savings over the lives of those contracts, while increased pension contributions from police and firefighters are expected to save the city $578,400 over three years.

All the city's non-safety unions have agreed in recent months to discuss adding a "second tier" of retirement benefits for new hires that would increase the new hires' retirement ages and lower the compensation amount their pensions are based on. And Russo has said he plans to sit down with the city's public safety unions this summer to ask for additional help in managing the city's pension costs.

The city's pension costs are expected to be $9.92 million this year. That's less than the $10.1 to $11.5 million that the city has paid into CalPERS each year since 2004, but triple what the city paid CalPERS for its employees' retirement benefits in 2001.

CalPERS is the state pension fund that manages most cities' investments, including Alameda's.

Alameda has also faced chronic budget deficits, including an estimated $5.1 million funding gap in the 2012-2013 budget that the city council considered on Tuesday. City staffers have recommended closing the budget deficit by cutting positions and shuttering the city jail, among other things.

The city is projected to pay the equivalent of 40 percent of Alameda's public safety payroll and 17 percent of its non-safety payroll toward pensions by 2014; the amounts are 37 percent and 15 percent this year (public-safety pensions account for $7.5 million of the city's costs this year, while other employees' pension costs account for $2.42 million).

Annual financial reports released by the city show that Alameda's unfunded pension liabilities more than doubled between 2002 and 2008, from $36.3 million to a little over $74 million. The city's most recent consolidated annual financial report shows the city with nearly $95 million in unfunded pension liabilities in 2010.

Back in 2002 the city's pension plan for public safety was 78 percent funded by existing assets, while its non-safety plan was overfunded by $2.5 million; in 2010, the city's safety plan was 75.4 percent funded and its non-safety plan, 89.1 percent funded.

Alameda has 558 current employees enrolled in its two retirement plans and 763 receiving retirement benefits, Assistant City Manager Lisa Goldman said, or 0.73 active employees paying into the system for every retiree taking benefits.

Read this entire story that includes a comparison with the city of San Jose at www.thealamedan.org.

 

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