Fullerton looks to public pension critic

Orange County Register (California)

BYLINE: By LOU PONSI and TERI SFORZA, THE ORANGE COUNTY REGISTER

8/9/2012

So the folks at Stanford University’s Institute for Economic Policy Review have been sticking their studious fingers in the eyes of California’s public pension systems for some time.

They’re the ones who’ve said that public pensions may be a half-trillion dollars in the hole. And that Orange County’s retirement system is some $10 billion under water. And that how we do public pensions has got to change.

Yes, the Stanford Institute for Economic Policy Review has managed to infuriate most every public worker in the state of California – and now, it will be going to work for Fullerton.

Tonight, Fullerton is expected to approve hiring the institute and its leader, Joe Nation, to grapple with Fullerton’s unfunded pension and retiree health-care liabilities. Pension liabilities alone could be as high as $119 million for police and fire employees, plus as much as $58 million for non-safety workers, according to the city manager’s report.

Unfunded liability is the difference between the amount the city has promised to current and future retirees, compared with the funds on hand to meet those obligations.

“Part of protecting the financial health of the city is knowing what to expect,” said Fullerton Councilman Travis Kiger, who first proposed bringing in Nation to perform the study. “If you aren’t talking about bringing total compensation in line with the current economy, then you are not doing anything effective.”

Nation, a professor of the practice of public policy at Stanford, has performed similar analyses for the cities of San Francisco and San Jose.

The agreement on the agenda today will pay Nation and company up to $25,000 for their wisdom. They will be comparing Fullerton with Anaheim, Newport Beach and one more lucky Orange County city. The report will chart pension and retiree health costs as a share of city spending over the next several years under different scenarios; and will include suggestions on how to fix “financial challenges,” including “general changes in benefits, employee-employer cost sharing, revenue increases, and others” (which are sure to infuriate many). The report is due Aug. 27.

Coupled with the Orange County Employees Retirement System’s recent hiring of public pension reform guru Girard Miller, one might get the impression that Orange County governments are starting to push hard on the issue.

Fullerton contracts with the California Public Employees’ Retirement System, or CalPERS, to provide retirement benefits for all its employees. And some concessions by Fullerton’s employees have already been made.

For public-safety workers, the city currently contributes 32 percent of payroll toward pension benefits, and public-safety workers contribute between 9 percent and 9.5 percent of their paychecks (up from less than 3 percent previously). For general workers, the city contributes 11 percent of payroll, and workers kick in 7 percent (previously, they paid nothing).

According to the city managers’ report, police and firefighters, currently working under the 3-percent-at-50 retirement formula, will soon shift to the 3-percent-at-55 formula. That means those who retire at 55 or older collect a pension equivalent to 3 percent of their three highest-paid years for each year of employment. So a 55-year-old firefighter whose highest average salary was $100,000, and who worked for the city for 20 years, would retire and receive an annual pension of $60,000.

Fullerton’s regular (non-safety) workers are on a 2 percent-at-55 plan, meaning a worker who earned $100,000 and retired after 20 years would receive $40,000 annually once hitting age 55.

Gov. Jerry Brown has suggested moving the retirement age for new public employees to 67. His plan doesn’t give a target age for new public-safety hires, but notes that it was once set at 60.

PUBLICATION-TYPE: Newspaper

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