The next disaster
The City Council may have passed a balanced budget this year, but we’re apparently not out of the woods yet, fiscally speaking. “Now what?” you may ask. How’s about multi-million-dollar increases in the city’s pension costs?
Apparently, the investment portfolio of the state-run Public Employee Retirement System, which Alameda uses as its pension fund, has seen losses over the last few years that some fear could be as high as 20 percent. And guess who’s responsible for covering those losses? A tip o’ the hat to those of you who answered with a hearty “We are!”
Many of us have 401(k) or similar retirement plans, and we are personally responsible for dealing with whatever losses they take. But the state’s system promises the same benefits no matter what happens in the markets. If they don’t earn enough to cover the benefits, the cities, counties and school districts that invest in the system must make up the difference.
CalPERS’ actual losses will become public in October, and city staff should get a letter detailing the Island’s pension rate increases in April 2010. Interim City Manager Ann Marie Gallant said that rates could rise by $3.5 million to $5.5 million starting in 2011. (Last year, the city contributed $11.1 million to PERS for its employees.)
Mayor Beverly Johnson asked Gallant if the city could drop PERS and join another benefit plan. Gallant said that some Southern California cities are doing just that.
“It’s a long process to drop PERS, but it’s something cities are thinking about,” Gallant said.
Meanwhile, city leaders still need to deal with that other retiree benefit problem, its growing retiree health care obligation (which, at $75 million and counting, is more than the city’s entire general fund budget this year). The council has okayed contracts with both police and firefighters that say they’ll talk about the problem but don’t offer any immediate changes to public safety benefits, which make up much of that amount.
Gallant said those costs, which the city is paying as it goes, will rise by $600,000 a year in 2011.