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PENSIONS: What they were thinking

Submitted by on 1, April 27, 2011 – 12:03 am17 Comments

Beverly Johnson had been on Alameda’s City Council for less than two years in 2000 when city staff approached her and other council members about upgrading public safety workers’ pensions.

Three months earlier, Governor Gray Davis and the state Legislature had authorized cities, counties and other agencies participating in the CalPERS retirement system to negotiate new public safety pensions that would allow workers to retire at 50 with 3 percent of their top salary for each year served. The new rules were approved almost unanimously after state leaders were told by CalPERS – which co-sponsored one of the bills authorizing the benefit increases – that the pension fund had a surplus of cash and that municipalities paying into it wouldn’t pay a cent more in contribution rates in the decade to come.

After receiving assurances from city staff that the changes wouldn’t cost the city anything, Johnson said, the council – unanimously and without debate – approved the benefit bumps, first for police and several months later, firefighters. But eventually, she said, she learned that all those assurances were for naught.

Now city leaders in Alameda, like cities across the state, are trying to cope with pension costs that are expected to grow sharply over the next several years, in part to compensate for investment losses CalPERS suffered when the stock and housing markets crashed in 2008. Alameda’s contribution rates are expected to rise to 45 percent of public safety workers’ salaries, from 31 percent now and 19 percent for the rest of the city’s employees, from 13 percent now, by 2015-2016 the city’s projections show. City staffers told the council in late March that they expect their pension contribution costs to rise by $1.75 million next year alone.

“It comes down to having to lay off police and firefighters to pay your PERS costs. That’s the choice cities need to make,” said Johnson, who has since emerged as one of the council’s strongest critics of the cost of public safety workers’ retirement benefits. (The city’s other employees get 2 percent of their top salary for each year they work and can retire at age 55.)

As part of a series of stories on pension costs, The Island contacted the three surviving members of the City Council that approved the enhanced benefit. Former City Councilwoman Barbara Kerr could not be reached for comment, and former councilman and recent mayoral candidate Tony Daysog declined to comment, saying he was gathering his thoughts in order to write his own opinion piece on the matter.

Daysog, who served on the city’s Fiscal Sustainability Committee in 2008-2009, told The Island when he ran for mayor in 2010 that he’d place public safety workers on furlough days in order to save money to pay for pension and retiree health benefits, and also that he would seek to create a two-tiered retirement system for public safety workers that would include a 401(k)-style defined contribution plan, hold down salary increases and open labor negotiations for public view.

Johnson said the pension increases were approved at a time when the state’s economy was flush and cities actively competed with each other and the private sector for workers, particularly police officers, who some cities were paying signing bonuses to hire. She said the city needed to offer the benefit in order to effectively compete for workers but that Alameda now needs to adapt to its reduced circumstances.

“At that time the economy was really strong. It was hard to hire people for jobs in the police department and for other city jobs,” said Johnson, whose husband is a police officer in another city. “Once you do that on a statewide basis when people are competing for jobs, you have to (do it locally too).”

Johnson said the city’s then-manager, Jim Flint, had promised to eliminate police retention pay and freeze positions in order to pay for the enhanced retirement benefit for police; she said those items were put back into police officers’ contract after the council approved it. Staff reports generated when the changes were made showed that the benefit would cost close to $854,000 a year for police officers and managers; the roughly $880,o00 a year in increased costs for firefighters and fire department managers was to be covered by freezing and cutting positions and trimming funding.

The city-run pension plan public safety employees had been in before entering the CalPERS system offered cost of living increases and no health care, the city’s human resources director, Karen Willis, said; an earlier plan offered to safety retirees raises every time active employees received them, allowing them to earn more in retirement than they had when they were working, Johnson said.

She said former City Manager Debra Kurita, who began working for Alameda in 2007, had tried to convince the council to increase pension benefits for non-safety employees but the council opted not to.

Johnson and other city leaders later discovered the new pensions were “not sustainable,” she said. And cities and other agencies that invest in the PERS system – and by extension, the taxpayers in those places – are now stuck covering those losses, she said.

“They were falsely reassuring cities, ‘don’t worry about paying pensions’ – our investments will pay,” Johnson said of CalPERS.

Johnson said she’s encouraged by efforts that have been made at the bargaining table to address pension and retiree health care costs. So far, Alameda’s firefighters have hammered out a tentative contract with the city, but the details have not yet been made public.

“We can’t fix everything in one fell swoop. But there are significant steps forward,” Johnson said. “And we will keep working on the issue.”

Previously

Alameda’s $100K club

A brief history

Peril is in the eye of the beholder

17 Comments »

  • John says:

    “We can’t fix everything in one fell swoop. But there are significant steps forward,” Johnson said. “And we will keep working on the issue.”

    You gave them it all in ONE FELL SWOOP you can take it away faster with the condition of our city in in financially. I think we need to Face the Music now.

    “It comes down to having to lay off police and firefighters to pay your PERS costs. That’s the choice cities need to make,” said Johnson, who has since emerged as one of the council’s strongest critics of the cost of public safety workers’ retirement benefits. (The city’s other employees get 2 percent of their top salary for each year they work and can retire at age 55.)

    Why is laying off police and firefighters only choice. Can’t they take a substantial Cut in Salary’s and Benefits and Pensions A BETTER OPTION or is that ONLY option they are giving you? It really does not come down to that ONLY.

    After receiving assurances from city staff that the changes wouldn’t cost the city anything, Johnson said, the council – unanimously and without debate – approved the benefit bumps, first for police and several months later, firefighters. But eventually, she said, she learned that all those assurances were for naught.
    (The city’s other employees get 2 percent of their top salary for each year they work and can retire at age 55.)

    Was this the city Staff that get to retire at 55 that gave her this advice that wanted same sweet deal?

  • John says:

    There were 4000 firefighters applying for 20 jobs in San Jose. There are 1000’s looking to get into this field. 100 colleges just in California offering these courses with No jobs. There are ton’s of OPTIONS.

    The Public Sector is paying 9.50 an hour for Paramedic starting salary in San Francisco. 75-80% of all our fire calls are Medical.

    We had 17 Fireman making between 200-250K last year total compensation . another 48 making between 150-200K.

    The system is completely broken and the fire fighters are out of touch with reality. 70% of all the fire departments in the country are volunteer.

  • John says:

    It will be interesting to see what tentative agreement has been reached with firefighters.

    The median expected salary for a typical Fire Fighter in the United States is $41,308. This basic market pricing report was prepared using our Certified Compensation Professionals’ analysis of survey data collected from thousands of HR departments at employers of all sizes, industries and geographies.

    From National Job Board.

    Firefighter-EMT/FF-EMT 1/FF-Paramedic

    Job Title: Firefighter-EMT/FF-EMT 1/FF-Paramedic Position Number: #NA Department: Fire-EMS Division: Salary: FF/EMT $32,313 FF/EMT 1 $36,313 FF/Paramedic… $32,313 – $36,313 a year

    Part-time Firefighter/Paramedic
    position of CERTIFIED Part-Time Fire Fighter / Paramedic. Job Summary: Performs fire suppression duties, renders emergency medical care… $12 an hour

    Job title: Firefighter/Paramedic or Firefighter/EMT
    Date posted: 04/19/11
    Job type: Full-Time
    Compensation: $42,715 Annually

  • lucille says:

    There she goes again! Beverly Johnson NEVER takes responsibility for her actions to hear her speak she was either 1- totally incompetent as a Mayor 2. totally gullible believing everything she was told 3. gullible and ill-prepared meaning she believed everything she was told and never asked questions or dug deeper or 4. aware of what was happening.

    Which is it Bev? You can’t sit in the big seat for 8 years and then say that bad staff told me the wrong thing. Are we not supposed to believe that her decisions were not at all influenced by her POLICE OFFICER husband?? We know he’s in another jurisdiction, but are we supposed to believe she wasn’t motivated by her own self interest.

    I love these stories…Bev, you need to WOMAN UP and take some responsibility. We all know you were asleep at the wheel. We’ve seen you babbling endlessly at the Council meetings and seen you making sure your friends get lucrative city deals. That’s why were such a Gallant supporter — you both dealt in back room deals. Nice to blame Flint and Kurita, it’s convenient. I am interested to hear what Tony, the numbers cruncher, will come up with as his answer for supporting this! LEADERSHIP!! I can’t wait to return BJ to private citizenship…FOREVER.

  • Irene D. says:

    Below are the meeting minutes approving the unsustainable benefit package.

    The public didn’t seem to care back then. It was difficult for me to be the lone voice opposing the increase when it was not popular. As I walked home I feared the fire department not showing up to my house in the event of a fire, even though I’m sure it was a false worry.

    ***

    Regular Meeting Minutes
    Alameda City Council
    October 2, 2001

    Irene Dieter, Alameda, stated firefighters should be compensated for their risk; however, there is only so much money in the budget; 3% at age 50 will cost a lot of money; inquired whether any programs will be cut or compromised because of the increased benefit for the firefighters; further stated money will be reallocated and taken from somewhere; there is only so much money to go around; roads, libraries and other projects should not be compromised.

    The City Manager stated no programs will be compromised; the City will continue to deliver the best quality Fire and Medical Emergency Service in the County of Alameda; average response times are 3 minutes and 50 seconds; the County-wide average is between 8 and 12 minutes.

    Vice Mayor DeWitt stated no programs are being cut at this time.

    Councilmember Johnson stated the City Council is always concerned about money; during the last budget cycle, a small Capital Improvement Project list was established to address small projects not being done because there are so many big projects; the City Council tries to be fiscally aware, conservative and conscientious; dealing with the taxpayers money is a big responsibility; Police Officers receive the 3% at age 50 benefit; the Governor authorized the benefit; the City needs to keep competitive with other Fire Departments; the benefit is available Statewide.

    The City Manager stated the City does not have enough money to do everything desired; cities never have sufficient funds to accomplish all programs and desires of communities; over the last 41/2 to 5 years, the City has added l0% to the General Fund reserve; growing reserves from 18.5% to 28.5%, due to solid management practices by staff and the Council; the City takes a conservative approach to managing limited resources.

    Councilmember Kerr stated that she concurs with Councilmember Johnson’s comments; the increase in the retirement benefit was introduced by the Governor and made mandatory for State employees; cities and other local jurisdictions were given the option of adopting the increased retirement benefit; the benefit became a competitive tool for luring people away from other jurisdictions; once said benefits were offered in other jurisdictions, the City of Alameda had to review the matter; the cost of training new employees is very expensive; turnover can cost the City a great deal; the Council reviewed said cost when making the decision.

    Councilmember Daysog moved adoption of the Resolutions [Nos. 13401 and 13402] approving revised MOUs for the firefighter and fire management associations.

    Councilmember Kerr seconded the motion, which carried by unanimous voice vote – 4. [Absent: Mayor Appezzato – l.]

    (O1-526) Resolution No. 13402, “Approving Revised Memorandum of Understanding and Salary Resolution Between the Alameda Municipal Fire Management Association and the City of Alameda for the Period Commencing October 1, 2001 and Ending January 2, 2010.” Adopted.

    http://docs.ci.alameda.ca.us/WebLink8/0/doc/75467/Page2.aspx

  • John says:

    In October 2001 when this was approved the Tech Bubble had already popped and Stocks and The Nasdaq Market had Lost 80% of Its Value and All Tech companies Were laying off thousands. To not be aware of what had transpired in previous 12 months to this regarding economy and what was happening and go ahead and approve raises and new benefits to employees was HUGE Betrayal of the Citizens of Alameda.

  • John says:

    Here is what The City Charter States. Does this mean anything or just Paper?

    Establish on or before July 1, 1938, a retirement, pension and insurance system for City officers and employees based on sound actuarial principles, which system once adopted shall not be amended except by majority vote of the full Council and shall not be repealed except by the People. Such system shall provide for the support thereof by deductions from the compensation of officers and employees of the City and contributions from City funds and funds under the control of the respective boards.

  • John says:

    In 2001, US companies announced nearly two million
    layoffs. This was the highest number since the last
    recession.

    The US economy officially entered a recession in March of 2001,
    and GDP growth crossed the line from slowing to
    declining in the third quarter.

    Lucent in Alameda topped this list. The company
    halved its workforce to 57,000

  • Barbara says:

    It breaks my heart to see what is going on this once great Island.
    I see failed leadership, betrayal, self-interest and self-promotion of career politicians.
    I see self-appointed leaders demanding more taxes as the only solution to the problems they created, and the desire to keep the status quo and their power in place. Sad, sad, sad… But I believe in people and the spirit of Americans!!!

  • John says:

    “They were falsely reassuring cities, ‘don’t worry about paying pensions’ – our investments will pay,” Johnson said of CalPERS.

    CALPers Was posting 12 Billion in losses and saying don’t worry as Market crashed Pre 911 and most business were at a standstill and losing millions right into your Decision. Who exactly was telling you that. Whole world was worrying about financial abiss and your Staff advising you different.

    What’s Wrong with this picture?

  • Tough Love says:

    Civil Servants Pension Plan are simply TOO generous and WE pay for them. Reform is so WAY overdue. Read on:

    So let’s cut to the chase …….

    Private sector employers typically contribute 3%-8% of an employee’s cash pay towards retirement, yet the total cost (expressed as a level annual % of cash pay throughout one’s career) of Public Sector Defined Benefit pensions (for a 30-year employee retiring at age 55) ranges from 29% to 58% depending on the richness of the benefit formula (with safety workers generally at the highest end).

    More specifically, for the noted formulas, the level annual %s of cash pay are as follows:
    2% per year of service w/o COLA – 29%
    2% per year of service with COLA – 39%
    3% per year of service w/o COLA – 44%
    3% per year of service with COLA – 58%

    Even after deducting the typical employee contribution of about 5% of pay, that still leaves the employer (meaning TAXPAYERS) contributing 24% to 53% of pay. The middle of these %s is 38.5% vs 5.5% (the middle of the range of what Private Sector employers contribute) or SEVEN (yes SEVEN) times greater.

    This is completely absurd, and the very modest “tweaking” at the edges by practically begging employees for a few more percent of pay contributions will NOT even begin solve the HUGE financial problem.

    TOTAL COMPENSATION (Cash Pay plus Pensions plus Benefits) should be comparable in the Public and Private Sectors for similar jobs, and with Cash Pay in the Public Sector now AT LEAST equal to (if not greater) than that in the Private Sector, there is ZERO justification for greater Public Sector Pensions and Benefits .

    Not for PAST service, but for FUTURE service, Public Sector pension accruals must immediately be brought FULLY down to the level of their Private Sector counterparts. Due to the huge reduction needed, the ONLY way to do this is to freeze the current defined benefit plans for CURRENT (yes CURRENT) workers, and switch everyone into a 401K-style Defined Contribution Plan with an employer contribution in the same 3%-8% range granted Private Sector workers.

    Additionally, since Private Sector retirees rarely get any retiree healthcare subsidy before eligibility for Medicare at age 65, similar restrictions should apply to Public Sector retirees.

    It’s TAXPAYERS’ money and Civil Servants are NOT more worthy of bigger pensions and better benefits.

  • SkippingDog says:

    I guess you’ve all forgotten what happened about a month before the enhanced pensions were approved for police and firefighters.

    My how memories are short once the danger passes.

    • Tough Love says:

      Sorry Skippy, protecting us from terrorists is a job for the Feds (military, CIA, NSA, etc.) not the already VASTLY over-pensioned county or local cop with a traffic-ticket book in his pocket.

      And I expected more from you than the “hero” card. It’s worn, it’s tattered, and it’s been so overused, it’s pathetic.

  • John says:

    “At that time the economy was really strong. It was hard to hire people for jobs in the police department and for other city jobs,” said Johnson, whose husband is a police officer in another city. “Once you do that on a statewide basis when people are competing for jobs, you have to (do it locally too).”

    Economic aftermath September 11 2001

    Economic effects arising from the September 11 attacks
    The attacks had a significant economic impact on the United States and world markets.[207] The New York Stock Exchange (NYSE), the American Stock Exchange (AMEX), and NASDAQ did not open on September 11 and remained closed until September 17. When the stock markets reopened, the Dow Jones Industrial Average (DJIA) stock market index fell 684 points, or 7.1%, to 8921, a record-setting one-day point decline.[208]

    By the end of the week, the DJIA had fallen 1,369.7 points (14.3%), its then-largest one-week point drop in history, though later surpassed in 2008 during the global financial crisis.[209] U.S. stocks lost $1.4 trillion in value for the week.[209] This is equivalent to $1.74 trillion in present day terms.[210]

    In New York City, about 430,000 job-months and $2.8 billion in wages were lost in the three months following the 9/11 attacks. The economic effects were mainly focused on the city’s export economy sectors.[211] The city’s GDP was estimated to have declined by $27.3 billion for the last three months of 2001 and all of 2002. The Federal government provided $11.2 billion in immediate assistance to the Government of New York City in September 2001, and $10.5 billion in early 2002 for economic development and infrastructure needs.[212]

    The 9/11 attacks also hurt small businesses in Lower Manhattan near the World Trade Center, destroying or displacing about 18,000 of them. Assistance was provided by Small Business Administration loans and federal government Community Development Block Grants and Economic Injury Disaster Loans.[212] Some 31,900,000 square feet (2,960,000 m2) of Lower Manhattan office space was damaged or destroyed.[213]

    Many wondered whether these jobs would return, and the damaged tax base recover.[214] Studies of the economic effects of 9/11 show that the Manhattan office real-estate market and office employment were less affected than initially expected because of the financial services industry’s need for face-to-face interaction.[215][216]

    North American air space was closed for several days after the attacks and air travel decreased upon its reopening, leading to nearly a 20% cutback in air travel capacity, and exacerbating financial problems in the struggling U.S. airline industry.[217]

  • John says:

    911 attack happened 3 Weeks Before Last contract was signed that has put this City and it’s Citizens in Financial Peril because of it.

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