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HomeMy WebLinkAboutREDgradyb1March 11, 2011 RECEIVE D MAR s 1 201 1 SLO CITY CLERK RED FIL E - MEETING AGEND A DATE •9//s i ij ITEM # Q/ hardcopy: email: A I C OUNCIL AECDD DIR ,d ASrT CM A FIRE CHIEF rd' ATTORNEY trPW DIR P BEAKIORIG 'pP PAARKS&R CDIR p TRIBUNE ,p UTIL DI R P NEWTIMES P HR DIR ~o SIA CITY NEWS COUNCILACTIY MGR )'CLERK City Council 990 Palm Street San Luis Obispo, CA 9340 1 RE : Compensation Philosophy Dear Mayor and Council Members : I regret that I will not be able to attend your important meeting on Tuesday, March 15 , 2011 to discuss our city's `compensation philosophy' due to a prior commitment . I wil l therefore present my thoughts and ideas on this important topic here and I appreciate you r time and consideration. First I have a few general comments . It is well known that very many of us who live here today came from elsewhere where ou r salaries (and benefits) were substantially higher. We all took a voluntary pay cut in order to live here . We chose to do this because of the quality of life afforded to the residents o f San Luis Obispo . This is an attractive place to live, raise a family, and retire . But it will not remain this way if the present percent of our tax dollars go towards personnel cost s and retiree benefits ; there will not be enough left over for our streets, parks, infrastructure , and other vital city programs that help make this the desirable place it is . Why has our city's compensation structure gotten so out of line with what is earned by th e rest of our city's residents? And why must we constantly be comparing ourselves t o supposedly `comparable' cities? I think it's time that our city's compensation structur e and philosophy be brought more into alignment with the private sector . I have read the Agenda Report regarding our city's compensation philosophy prepared b y Monica Irons, our Human Resource Director . I find a lot in here to agree with - there are many constructive and valuable recommendations that I urge you adopt . Monica Irons ' Agenda Report refers to the `2007 Benchmark Compensation Study'which I also read t o better understand the context of the present discussion . I would first like to address thi s 2007 Benchmark Study and then move on to discuss our compensation philosophy . I have significant problems with the methodology used to select the nine `comparable ' cities, and I therefore question the conclusions of that study. Some of the demographi c elements used by the 2007 study to select `comparable' cities included "population , median household income, and number of employees in the agency ." These are al l relevant and valid factors to consider in selecting comparison cities ; the problem is, the y weren't applied in selecting the cities chosen for the comparison! Consider the followin g with regards to these three criteria : Population - San Luis Obispo has the 3 1-e lowest population of the cities we are compared with, having 27% fewer residents than the median population of the cities selected and 32%less than their average . Two of the nine cities had more than twice our population . Median Household Income - We have the second lowest median household income of all the cities selected and are 33%below the median income figure and 28%below the average income figure of these nine cities . Number of City Employees - We have the second lowest number of city employees of the nine cities ; only Paso Robles has fewer . Our number of employees ranks 22%below the median and 35%below the average for this category . If our population, median household income, and current number of city employees are all 25% to 33%less than the cities selected, why were these cities selected? How can they b e considered `comparable', and therefore why should we even be measuring our employe e compensation (including salaries, pensions, insurance, paid time off, etc .) against thes e cities? It appears to me that we are comparing apples to oranges, so the conclusions that were drawn are not valid. If we want to compare ourselves to other cities with regards to employee compensation , then let's look to the neighboring cities in our county . After all, isn't it these cities that w e are in competition with in recruiting and retaining quality employees for at least the vas t majority of our jobs (with the exception of directors and top management positions)? Ar e we really competing with Chico or Davis or Ventura (all cities used in the 2007 study) o r with cities such as Pleasanton, Napa, or Gilroy (all cities which were used by the Polic e Officers' Union in their binding arbitration dispute in 2008)? One other issue I take with the 2007 report's methodology is its comparison of salaries i n the public sector with those in the private sector . The study compared public versu s private sector salaries head to head, stripped of any benefits (like pensions, health insurance, paid time off, etc .). This method of comparing salaries between the public an d private sectors is rather meaningless, as an employee's totalcompensation packag e includes far more than simply salary alone,especially for a government employee . One needs to consider this total compensation to fairly compare employees between the publi c and private sectors . It is typical these days that a government employee has better insurance benefits, a bette r retirement plan, more paid holidays, etc ., than a counterpart in the private sector . So it is not a fair comparison to compare only salaries between equivalent positions in the publi c versus private sector . It is once again an apples to oranges comparison . I believe that a city employee's benefits easily add another 40% to 60% (or more) adde d cost to the city on top of their compensation, particularly with the amount the city no w contributes towards pension costs alone (18% for miscellaneous employees and 36% fo r safety employees), as well as the "pick up"of the employee's portion of these costs (another 8% to 9% of salaries). These pension costs alone add an additional 26% to 45 % above salary expense to the city . If you then add insurance benefits (health, dental, vision , life, and disability), vacation pay, holidays, and all the other benefits, the city easily has expenses of 40% to 60% on top of wages paid . This was all omitted in the comparison . Why did the 2007 benchmark study exclude these benefits when comparing public t o private sector salaries? One should expect the public sector employee's salary to b e significantly lower than a comparable job in the private sector, due to these added benefit s provided for the city employee that are typically not provided in the private sector . This i s especially true in San Luis Obispo where we have a disproportionately large number o f smaller employers . A fair comparison of compensation between the public and privat e sectors must consider total compensation, including the value of all the benefits provided . Returning to Monica Irons' agenda report, she states on page 2 that "65% of the City's total operating budget (is) comprised of personnel costs ." I have read and heard many times lately that personnel costs comprise fully 80% of our budget . Perhaps this is simpl y a matter of how our budget is defined (e .g ., including water & sewer revenues, etc .), but I believe if we use our `operating budget' that our personnel costs comprise nearly 80%. Either way, I believe personnel costs need to be reined in . I'd like to bring to council's attention an attachment to my letter entitled, `City Employee Salary & Benefits as a Percent of Total Expenditures'. This report, compiled using dat a from the State Controller's office, is available online at www.californiacityfinance .com . The latest figures in the report are from 2007-08 ; at that time the mean or average of a city's budget spent on personnel costs for all the cities in California was 47%, while th e figure quoted in the report for San Luis Obispo at that time was 72%. So, our personne l costs at that time were 53% above the state average ! I am encouraged by the recommendations in the Agenda Report prepared by Monica Iron s and am pleased to learn that a plan is forthcoming for your consideration "that will includ e personnel cost reductions ." I wholeheartedly agree with the recommendation that our city's fiscal sustainability should be the paramount concern in compensation decisions , and that "the City's fiscal sustainability should guide compensation philosophy ." I'm als o heartened by the clarification of our `relevant labor market' and by the philosophy state d that "when the relevant labor market is defined as `local' for a classification, local privat e sector compensation data will be considered ." We are at a vital crossroads and your actions in the coming months will have significan t impacts upon our city's quality of life as well as on our financial sustainability for years t o come. I think everything should be on the table and reviewed with regards to employe e compensation, including salaries, insurance benefits, vacation time, paid holidays , administrative leave, car allowances, etc ., and particularly pension benefits . This revie w should take place for all city employees, be they safety, miscellaneous, or management .I support the Agenda Report presented by Monica Irons and urge council's adoption of it a s a vast improvement over our current Compensation Philosophy Resolution . My recommendations regarding compensation, particularly with regards to pensions , include : •Elimination of the "step in grade" pay increases and replacement with merit increases . The current system offers no incentive for exemplary performance, whereas meri t increases would motivate, reward, and retain our better performing employees . •Better alignment of city salaries and benefits with those of the local private sector and local cities, or where local private sector and city comparisons are no t applicable, at least with truly comparable cities . •Requirement that all city employees contribute their full and fair share into thei r pension as prescribed by Ca1PERS, with no commensurate increase in employe e compensation as has previously been done . •Implement a pension plan along the lines of the Federal model (FERS) for all cit y employees . This model has three components : a defined benefit plan, a define d contribution plan, and social security . As the recent Tribune editorial (2/26/11) noted , the Federal pension model is currently running a surplus . It also is a much mor e sustainable model and is far more equitable to our taxpayers . •Apply any adjustments of the pension formula to all city employees, including current employees. While one's previously earned pension benefit cannot (and should never ) be taken away, there is no reason the formula for calculating pension benefits goin g forward cannot be changed, much as you adjust employees' salaries and other benefit s through negotiations . In lieu of adopting the FERS pension model, should you continue with CaIPERS, th e pension formulas should be rolled back (to where most of these benefits were just fiv e to ten years ago) as follows : •2% at 50 for safety (police officers and firefighters). •2% at 60 for all others (miscellaneous and management employees). •Use 5-year final average earnings for final compensation calculation . •Exclude from `PERSable' compensation any pay above one's base salary, excludin g compensation such as uniform allowance, holiday pay, employer paid pick-up , paramedic pay, hazardous pay, etc . The city should also : •Negotiate cost sharing agreements with the union groups, requiring employees to pay a portion of the employer's contribution should the employer's rate rise above a certai n threshold . This would equitably share the risk of pension funding between employer and employee . •Negotiate a pension benefit cap, such as 75%, of the 3-year final average earnings . Most or all of these recommendations were discussed at the special city council meetin g held on February 23, 2010, when one of your agenda items was Ca1PERS retirement costs . In conclusion, it is time that you take decisive action for the benefit of all of our city's stakeholders, including employees and residents alike . If the Council explains and cit y staff understands the necessity and rationale of your actions, I believe you will fin d widespread support for your actions among employees and residents alike . Future councils will be grateful for your courageous actions taken today . I appreciate your time and your deliberate consideration of my perspectives an d suggestions . Very truly yours , John Grady San Luis Obispo, CA 9340 1 Attachments City Employee Salary & Benefits as a Percent of Total Expenditure s Source: Computations by Cal i 1991-92 1992-93 1993-94 1994-95 1995-96 1996-97 1997-98 1998 .99 1999-00 2000-01 2001-02 2002-03 2003-04 2004-05 2005-06 2006-07 2007-0 8 455 459 458 460 445 467 463 465 461 470 470 469 471 469 469 468 46 9 0 .50 0.49 0 .49 0 .49 0 .47 0 .47 0.47 0 .45 0 .44 0 .44 0.44 0 .45 0 .46 0 .47 0.47 0 .47 0 .4 7 0 .16 0.16 0 .18 0 .18 0.16 0 .17 0.17 0 .16 0 .16 0 .17 0.16 0 .16 0 .16 0 .17 0.17 0 .17 0.1 7 0 .53 0.52 0 .52 0 .52 0.49 0 .49 0 .48 0 .46 0.45 0 .45 0.45 0 .46 0 .48 0 .48 0.49 0 .48 0.4 9 0 .40 0.39 0 .39 0.39 0.39 0 .39 0 .38 0 .38 0 .38 0 .36 0.38 0 .39 0 .39 0 .38 0.36 0 .37 0.3 6 0 .02 0.01 0 .03 0.03 0.03 0 .02 0 .01 0 .01 0 .01 0 .01 0 .00 0 .03 0 .03 0 .03 0.04 0 .03 0.0 4 0.85 0.88 0 .94 0.85 0.86 0 .92 0 .96 0 .81 0.90 0 .96 0 .81 0 .88 0 .85 0 .93 0 .90 1 .00 0.99 City County 1991-92 1992-93 1993-94 1994-95 1995-96 1996-97 1997-98 1998-99 1999-00 2000-01 2001-02 2002-03 2003-04 2004-05 2005-06 2006-07 2007-08 Alameda Alameda 0.48 0.46 0 .45 0.48 0.48 0 .48 0 .63 0 .46 0.45 0 .45 0 .45 0 .48 0 .54 0 .62 0.65 0 .44 0.49 Albany Alameda 0 .66 0.63 0 .78 0.68 0.62 0 .58 0 .62 0 .62 0.65 0 .58 0.45 0 .57 0 .57 0 .67 0.75 0 .72 0.67 Berkeley Alameda NR 0.76 0 .56 0 .78 0.69 0 .70 0 .72 0 .79 0 .75 0 .67 0.64 0 .71 0 .61 0 .65 0.65 0 .65 0 .69 Dublin Alameda 0 .19 0.19 0 .19 0 .18 0.15 0 .20 0 .19 0 .20 0.16 0 .19 0.18 0 .17 0 .20 0 .23 0.24 0 .23 0 .23 Emeryville Alameda 0 .80 0.80 0 .81 0 .80 0.67 0 .75 0 .67 0 .65 0 .52 0 .51 0.62 0 .63 0.66 0 .67 0.62 0 .55 0 .63 Fremont Alameda 0 .82 0.80 0.75 0 .77 0 .79 0 .78 0.78 0 .79 0 .74 0 .74 0.75 0 .79 0.77 0 .82 0.80 0.79 0 .99 Hayward Alameda 0 .70 0.73 0.69 0 .67 0 .71 0 .60 0 .53 0 .60 0 .59 0 .69 0.59 0 .69 0.70 0 .70 0.70 0 .73 0 .76 Livermore Alameda 0 .69 0.40 NR 0 .67 0 .86 0 .86 0 .62 0 .46 0 .41 0 .45 0.43 ,0 .44 0.44 0 .66 0.81 0 .58 0 .55 Newark Alameda 0 .60 0.64 0.62 NR 0 .62 0 .61 0.61 0 .65 0 .61 0 .60 0.62 0 .62 0.62 0 .71 0.73 0.73 0 .74 Oakland Alameda 0 .65 0 .64 0.60 NR 0 .50 0 .51 0.47 0 .54 0 .61 0 .51 0.45 0 .55 0.67 0 .69 0.66 0.61 0 .50 Piedmont Alameda 0 .72 0 .64 0.64 0 .66 0 .66 0.49 0.57 0 .63 0 .63 0 .59 0.64 0 .68 0.73 0 .72 0.68 0.70 0 .6 8 Pleasanton Alameda 0 .62 0 .61 0.60 0 .62 0 .59 0 .57 0.56 0 .51 0 .51 0 .54 0.57 0 .57 0.60 0 .63 0 .62 0.74 0 .6 4 San Leandro Alameda 0 .62 ' 0 .60 0.61 0 .55 NR 0 .60 0.47 0 .46 0 .51 0.43 0.38 0 .40 0.43 0 .44 0 .41 0.46 0.4 5 Union City Alameda 0 .71 0 .70 0.71 0 .52 0 .54 0 .51 0.56 0 .54 0 .55 0.68 0.72 0 .75 0 .72 0 .72 0 .71 0 .69 0.7 1 Amador Amador 0 .22 0 .14 0 .13 0 .11 NR 0 .19 0.05 0 .06 0 .10 0.07 0 .05 0 .08 0 .08 0 .08 0 .10 0 .08 0.07 lone Amador 0 .59 0 .50 0 .61 0 .57 NR 0 .02 0.39 0 .31 0 .39 0.52 0 .36 0 .45 0 .63 0 .74 0 .57 0 .30 0.3 5 Jackson Amador 0 .53 0 .57 0 .55 0 .57 0 .60 0 .57 0.56 0 .59 0 .51 0.56 0 .51 0 .51 0 .49 0 .31 0 .42 0 .48 0.47 Plymouth Amador 0 .37 0 .42 0 .33 0 .45 NR 0 .30 0 .29 0 .32 0 .21 0.20 0 .14 0 .17 0 .21 0.22 ,0 .21 0 .20 0.1 4 Sutter Creek Amador 0 .59 0 .58 0 .58 0 .55 0 .59 0 .23 0 .52 0 .40 0 .46 0.50 0 .45 0 .51 0 .48 0.50 0 .55 NR 0 .35 Biggs Butte 0 .33 0 .33 0 .31 0 .23 0 .17 0 .18 0 .17 0.18 0 .23 0.20 0 .20 0 .19 0 .21 0.15 0 .17 0 .12 0 .1 4 Chico Butte 0 .60 0 .65 0 .73 0 .60 0 .50 0 .80 0 .58 .0.54 0 .53 0 .63 0 .62 0 .64 0 .67 0.62 0 .70 0 .72 0 .73 Gridley Butte 0 .42 0 .42 0 .42 0 .38 0 .41 0 .41 0 .44 0.45 0 .37 0 .47 0 .41 0 .38 0 .43 0.49 0 .51 0 .49 0 .46 Oroville Butte 0.59 0 .69 ,0 .58 0.59 0 .53 0 .56 0 .83 0.53 0 .51 0 .54 0 .54 0 .48 0 .51 0.59 0 .53 0 .46 0 .55 Paradise Butte 0.73 0 .78 0 .78 0 .76 0.74 0 .74 0 .73 0.34 0.30 0 .66 0 .60 ,0.47 0 .57 0 .69 0.69 0.74 0 .74 Angels Calaveras 0.73 0 .64 0 .61 0 .63 0 .63 0 .63 0 .47 0.01 0.01 0 .01 0 .01 0 .05 0 .26 0 .13 0.52 0.50 0 .5 0 Colusa Coluaa 0.53 0.51 NR 0 .30 0.40 0 .52 0 .61 0.39 0.49 0 .51 0 .46 0.52 0 .52 0 .53 0.39 NR N R Williams Coluaa 0.38 0.40 0 .43 0 .34 0.37 0 .38 0 .22 0.36 0.21 0 .34 0 .39 NR 0 .40 NR 0.47 0.46 0 .4 8 Antioch Contra Costa 0.58 0.59 0 .52 0 .52 0.57 0 .56 0 .55 0.56 0.53 0 .48 0 .45 _0.54 0 .48 _0 .50 0.53 0.55 0 .5 2 Coun t Mean Standard Deviation Media n Wtd Mean (statewide sum/sum ) Minimu m Maximu m SOURCE: Coleman Advisory Service s compuations using State Controller reports Col iforniaCityFi nance . com page 1 of 1 2 City County 1991-92 1992-93 1993-94 1994-95 1995-96 1996-97 1997-98 1998-99 1999-00 2000-01 2001-02 2002-03 2003-04 2004-05 2005-06 2006-07 2007-08 Arroyo Grande San Luis Obispo 0 .63 0 .64 0 .66 0.64 0 .63 0 .66 0 .63 0 .65 0 .66 0 .65 0 .65 0 .65 0.66 0 .68 0 .69 0 .66 0 .67 Atascadero San Luis Obispo 0 .70 0,67 0 .65 0.58 0 .65 0 .68 0 .66 0 .66 0 .60 0.62 0 .61 0 .55 0.59 0 .62 0 .61 0 .63 0 .6 5 El Paso De Robles San Luis Obispo 0 .59 0 .60 0 .57 0.57 0 .56 0 .49 0 .60 0.52 0 .44 0.56 0 .54 0 .54 ,0.51 0 .81 0 .57 0 .40 0 .38 Grover City San Luis Obispo 0,54 0 .54 0 .54 0.50 0 .54 0.51 0,43 0.39 0 .35 0.42 NR 0 .51 0.51 0 .56 NR NR N R Morro Bay San Luis Obispo 0 .78 0 .76 0 .53 0.61 0 .45 0.34 0 .52 0.50 0 .47 0.51 0 .53 0 .53 0.55 0 .56 0.58 0 .55 0 .62 Pismo Beach San Luis Obispo 0 .53 0 .49 0 .58 0.59 0 .45 0.44 0 .36 0.38 0 .36 0.47 0 .44 0 .45 0.48 0 .50 0.52 0 .50 0 .5 3 San Luis Oblspo San Luis Obispo 0 .64 0 .66 0.69 0 .66 0 .65 0.65 0 .68 0.65 0 .64 0.67 0 .67 0 .68 0.69 0 .70 0.71 0 .68 0 .72 Atherton San Mateo 0.51 0 .67 0.71 0 .73 0 .67 0.66 0 .64 0.66 0 .59 0.55 0 .57 0 .60 0.63 0 .69 0.65 0 .45 0 .5 9 Belmont San Mateo 0.60 0 .60 0.60 0 .61 0 .58 0.56 0 .81 0.44 0 .32 0.40 0 .49 0 .50 0 .46 0 .51 0.54 0 .58 0 .56 Brisbane San Mateo 0.78 0 .68 0.61 0 .58 0 .63 0.58 0 .69 0.57 0 .55 0 .64 0.62 0 .60 0 .65 0 .83 0.84 0 .86 0 .66 Burlingame San Mateo 0.68 0 .68 0.69 0 .88 0.68 0.71 0,70 0 .47 0 .42 0.60 0.52 0 .61 0 .70 0 .55 0.59 0 .65 0 .70 Colma San Mateo 0.44 0 .40 0.42 0 .47 0.50 0.44 0 .40 0.36 0 .44 0.44 0.45 0 .48 0 .52 0 .48 0.48 0 .53 0 .54 Daly City San Mateo 0.62 0 .62 0.61 0 .62 0.59 0.54 0 .81 0 .51 0 .55 0 .54 0.59 0 .60 0.64 0 .66 0.66 0 .70 0 .78 East Palo Alto San Mateo 0.54 0 .55 0.54 0 .57 0.59 0.51 0 .48 0 .51 0.34 0 .41 0.35 0 .37 0 .43 0 .51 0.54 0 .53 0 .54 Foster City San Mateo 0.65 0 .76 0.78 0 .66 0.65 0.58 0 .77 0 .71 0 .62 0 .73 0.51 0 .59 0 .79 0 .87 0.87 0 .89 0 .9 1 Half Moon Bay San Mateo 0.48 0 .47 0.52 0 .40 0.36 0.46 0 .40 0 .41 0.43 0 .46 0,54 00.555461- 0.46 0 .55 0 .53 0.57 0 .49 0 .50 Hillsborough San Mateo 0.61 0 .61 0.59 0 .61 0.56 0.58 0 .60 0 .52 0 .60 0 .54 .58 0 .57 0 .57 0 .81 0.67 0 .59 0 .66 Menlo Park San Mateo 0.59 0 .61 0.63 0 .58 0.60 0.61 0 .56 0 .57 0 .58 0 .57 0.59 0 .60 0 .57 0 .81 0.63 0 .66 0 .73 Millbrae San Mateo 0.54 0 .54 0.57 0 .59 0.59 0.75 0 .89 0 .14 0.65 0 .84 0.64 0 .64 0 .63 0 .60 0.49 0 .58 0 .60 Pacifica San Mateo 0.71 0 .71 0.69 0 .69 0.71 0.60 0 .55 0 .47 0.51 0 .55 NR NR 0 .59 NR 0.63 0 .63 0 .62 Portola Valley San Mateo 0.31 0 .33 0.28 0 .31 0.32 0.38 0 .21 0 .39 0.15 0 .10 0.13 0 .28 ,0 .33 0 .40 0.40 0 .41 0 .42 Redwood City San Mateo 0.54 0 .52 0.54 0 .53 NR 0.53 0 .61 0 .52 NR 0 .53 0.54 0 .53 0 .54 0 .54 0.52 0 .53 0 .60 San Bruno San Mateo 0.55 NR 0.51 0 .52 0.46 0.41 0 .46 0 .43 0.43 0 .51 0.46 0 .48 0 .45 0 .48 0.44 0 .44 0 .48 San Carlos San Mateo 0.46 0 .45 0.46 0 .41 0.42 0 .42 0 .45 0 .45 0.44 0 .39 0.48 0 .47 0 .49 0 .48 0.51 0 .49 0 .49 San Mateo San Mateo 0.77 0 .74 0.76 0 .74 0.73 0.71 0 .73 0 .78 0.77 0 .73 0.72 0 .75 0 .74 0 .73 0.76 0 .74 0 .75 South San Francisco San Mateo 0.72 0 .65 0.63 0 .62 0.52 0.47 0 .47 0 .51 0.58 0 .59 0.58 0 .66 0 .68 0 .70 0.72 0 .65 0 .61 Woodside San Mateo 0.31 0 .37 0.45 0 .36 0 .45 0.47 0 .43 0 .39 0 .36 0 .40 0.44 0 .50 0.52 0 .45 0.46 0 .51 0 .4 8 Bueliton Santa Barbara NR 0 .26 0.27 0 .25 0.23 0.23 0 .21 0 .23 0 .25 0 .19 0.18 0 .17 0.19 0 .18 0 .14 0.22 ,0 .1 9 Carpinteria Santa Barbara 0.80 0 .38 0.36 0 .35 0 .35 0.35 0 .35 0 .38 0 .38 0 .36 0 .33 0 .34 0.37 0 .35 0 .35 0.36 0 .3 7 Goleta Santa Barbara NR NR NR NR NR NR NR ,NR NR NR 0 .00 0 .05 0.19 ,0 .19 0 .20 0.21 0 .2 5 Guadalupe Santa Barbara 0.63 0 .52 0.53 0 .48 0 .41 0.31 0 .32 0 .37 ,0 .33 0.41 0 .39 0 .40 0.41 0 .44 0 .46 0.61 0.5 1 Lompoc Santa Barbara 0.40 0 .41 0.42 0 .41 0 .41 0.44 0 .45 0.45 0 .40 0.38 0 .44 0 .40 0.42 0 .38 0 .41 0.47 0.4 8 Santa Barbara Santa Barbara 0.60 0 .63 0 .71 0 .89 0 .69 0.69 0 .89 0.45 0 .45 0.45 0 .44 0 .59 0.56 0 .58 0 .58 0.58 0.5 8 Santa Maria Santa Barbara 0.48 0 .62 0 .61 0,61 0 .81 0.61 0 .61 0.61 0 .62 0.61 0 .61 0 .61 0.60 0 .45 0 .48 ,0.36 0.4 1 Solvang Santa Barbara 0 .23 0 .27 0 .33 0 .30 0 .26 0.22 0 .20 0.29 0 .21 0.21 0 .27 0 .23 0.25 0 .29 0 .25 0 .29 0.2 5 Campbell Santa Clam 0 .62 0 .68 0 .50 0 .53 NR 0.55 0 .56 0.58 0 .61 0.53 0 .54 0 .59 0.61 0 .63 0 .64 0.63 0.63 Cupertino Santa Clara 0 .41 0 .42 0 .44 0 .37 0 .36 0.39 0 .39 0.40 0 .37 0.37 0 .36 0 .38 0.44 0.41 0 .41 0 .40 0.43 Gilroy Santa Clara 0 .57 ,0 .56 0 .58 0 .52 0 .47 0.52 ,0 .62 0.62 0 .51 0.51 0 .50 0 .59 0.64 0 .65 0 .62 0 .62 0 .63 Los Altos Santa Clara 0 .65 0 .65 0 .65 0 .66 0 .67 0.58 0 .49 0.49 0.50 0.48 0 .49 0 .47 ,0.49 0.53 0 .53 0 .50 0.50 Los Altos Hills Santa Clara 0 .23 0,32 0 .34 0 .29 0 .33 0.35 0 .33 0.28 0 .28 0.23 0 .29 0 .25 0.25 0.27 0 .26 0 .28 0 .33 Los Gatos Santa Clare 0.68 0 .75 NR 0 .77 0 .75 0.70 0 .59 0.61 0 .58 0.61_0 .66 0 .67 0.66 0.70 0 .72 0 .70 0 .71 SOURCE: Coleman Advisory Services compuations using State Controller reports Calif orniaCityFi nonce . com page 10 of 1 2 Commission recommends rolling back pensions for current state, local workers - Sacrame ... Page I of 3 1..E SACRAMENTO EE ia•t Commission recommends rolling bac k pensions for current state, local worker s jortiz@sacbee .co m Published Friday, Feb . 25, 201 1 California's state and local governments should roll back pensions for existing employees , dump guaranteed retirement payouts and put more of the burden for pension benefits o n workers, a bipartisan watchdog commission said Thursday . Any attempt to reduce pensions for current workers would prompt a legal battle royal . Still , the 12-member Little Hoover Commission concluded that government pension funds are i n such dire financial straits that they'll never right themselves without cutting into benefits fo r those working now . The proposal wouldn't affect benefits drawn by current retirees . "This is one of the toughest issues that we've taken on," said Chairman Daniel Hancoc k shortly before the commission unanimously approved the 100-page report and it s recommendations . Sacramento politicians had anticipated the moment . While Democrat Gov . Jerry Brown ha s proposed a mix of taxes and cuts to close the state's estimated $26 .6 billion deficit, hi s budget doesn't explicitly address pension changes, which would anger unions and would no t save money immediately . Republicans have criticized that as a glaring oversight . Senate Republican leader Bob Dutto n of Rancho Cucamonga has said his caucus would offer some pension-reform ideas once th e commission released its report . "I'm probably going to lean pretty heavily on taking their recommendations," he said . Public employee unions counter that guaranteed pensions make up for government's generally lower wages . They say the Little Hoover report and politicians like Dutto n overstate the pension problem to pursue an anti-union agenda and undercut collectiv e bargaining . Six unions representing about 170,000 state workers have already agreed to contracts tha t offer lowered retirement benefits for new hires and increase what employees pay towar d their pensions . "Our members - who are taxpayers, too - bargained in good faith and reached a n agreement including key pension changes and concessions," said Brady Oppenheim , spokeswoman for the California Association of Psychiatric Technicians . "If there is a call fo r further concessions, it should come through the collective-bargaining process and be take n to the bargaining table ." http ://www .sacbee .com/201 l/02/25/v-print/3429573/commission-recommends-rolling .html 3/11/2011 Commission recommends rolling back pensions for current state, local workers - Sacrame ... Page 2 of 3 The report caps a year's research and a series of hearings that included testimony fro m actuaries, union officials, pension reform activists, retirement board members, labor unio n leaders, public employees and others . It notes that the state's 10 largest public pension systems, including the California Publi c Employees' Retirement System, the California State Teachers' Retirement System and th e University of California pension fund reported in 2010 a collective $240 billion sprea d between their obligations and assets . "In another five years, when pension contributions from government are expected to jum p 40 to 80 percent and remain at those levels for decades in order to keep retirement plan s solvent, there will be no debate about the magnitude of the problem," the report says . Pension fund investment returns are supposed to cover the bulk of payments to retirees, bu t most haven't yet rebounded from Wall Street's meltdown in 2008 . CaIPERS says investment earnings account for 64 cents of every dollar it takes in, whil e employers kick in 21 cents and employees pay 15 cents . The commission recommends the employer/employee share be split equally . Since reducing pensions for the next generation of employees won't cut costs in the nea r term, the commission recommended the Legislature pass a measure that lets state and loca l governments freeze the pensions of current workers and move them into a less costly hybri d system . For example, a 20-year government employee planning to retire in 10 years at age 63 wit h 2 .5 percent of salary for each year of service would keep the money built up under tha t formula . But once the pension is frozen, the employee would move into a three-legged program tha t keeps a much smaller guaranteed pension, a professionally managed 401(k)-style saving s account and Social Security benefits . Some public employee retirement plans already include all three . Plans for current state workers and retirees vary - some receive Social Security and can invest in persona l retirement accounts . The conventional wisdom is that public pension benefits are untouchable, constitutionall y protected property that government has a contractual obligation to provide . A state law that says otherwise would set off a legal firestorm, said Sacramento-based labo r attorney Tim Yeung, since the sanctity of public pensions has never been tested in th e courts . Private companies can freeze pensions and lower their promises, he said, "bu t whether government can do it has never really been tested ." Still, the Little Hoover report buoyed pension change advocates such as Marcia Fritz , president of the California Foundation for Fiscal Responsibility in Citrus Heights . Her group, which gained national attention with a database that lists state and loca l government retirees with six-figure pensions, wants to put a measure on the 2012 ballot t o freeze pensions for all civil service employees and lower the benefit prospectively . "This is amazing," Fritz said after reading the report . "It just validates everything we've bee n saying for years ." © Copyright The Sacramento Bee. All rights reserved. http ://www .sacbee .com/2011/02/25/v-print/3429573/commission-recommends-rolling .html 3/11/2011 Commission recommends rolling back pensions for current state, local workers - Sacrame ... Page 3 of 3 Call Jon Ortiz, Bee Capitol Bureau, (916) 321-1043 . http ://www .sacbee .com/2011 /02/25/v-print/3429573/commission-recommends-rolling .html 3/11/2011 Editorial : The clock is ticking on bloated pensions - Sacramento Opinion - Sacramento Ed ... Page 1 of 2 Editorial : The clock is ticking on bloate d pension s Published Sunday, Feb . 27, 201 1 The Little Hoover Commission's report, "Public Pensions for Retirement Security," pulls n o punches . The situation is "dire," commissioners rightly warn . If something is not done to reduce retirement liabilities, "pensions will crush government ." Public employee retirement benefits in California are the most generous of any in th e country . They've gone from just 40 percent of pay for the average 30-year-state employe e when the retirement system was originally established in 1932 to close to 75 percent of pa y today . Many local government workers earn more the day they retire than when they worked . An d given earlier retirement ages - 55 for most public employees and 50 for firefighters, police and prison guards - and longer life spans, many retired state workers will actually pick u p more retirement checks in their lifetimes than paychecks . Such high costs are unsustainable , economically and politically . The report predicts that in coming years, cities like San Francisco, San Diego, San Jose an d Los Angeles will spend one-third of their operating budgets to finance their pension systems . It's not just citizens who risk loss of vital government services as retirement obligation s overwhelm state and local budgets . Public employees, the report says, will pay a price fo r inaction - salary freezes, layoffs increased payroll deductions and the threat of a city o r county bankruptcy . A pension not tied to a job is worthless ." In recent years, the state and some local governments have enacted modest reforms , boosting retirement ages to 60 from 55 for most new hires and from 50 to 55 for new publi c -safety employees, and increasing employee contributions to their own retirements . But th e savings come too late to avert serious fiscal distress . Given the magnitude of the problem the commission recommends what no other publi c entity has suggested before - cutting pension benefits for current workers . There will be a titanic fight in the halls of the Legislature, in the courts and at the ballot box to enact suc h reform . But reform is urgently needed . The fight is unavoidable . Specifically, the commission calls for the Legislature and local governments to freez e benefits for state workers now and enact new lower pension formulas for the future . Unde r the plan, current workers would be allowed to keep the benefits they have earned alread y but all future pension benefits would be lower . In addition, the commission calls for a restructured pension system based on a federa l government model . Workers would earn a much lower guaranteed retirement benefit tha t could be supplemented with both Social Security and a 401(k)-type plan to which bot h workers and government employers would contribute . http ://www.sacbee .com/2011 /02/27/v-print/3431893/editorial-the-clock-is-ticking .html 3/11/2011 Editorial : The clock is ticking on bloated pensions - Sacramento Opinion - Sacramento Ed ... Page 2 of 2 There are other common sense and long overdo fixes in the Little Hoover plan . To avoi d "spiking," future pensions would be calculated based on base salary exclusively and th e average of five years' pay, not the single year used for workers now and a three-yea r average for new hires in a recently created second tier . The plan also would bar employee s from buying extra credit or "air time" to enhance benefits, and it would strictly prohibi t granting retroactive pension enhancements . All of these maneuvers are used routinely t o enhance already generous public pensions . The question now is will the public employee unions, and majority Democrats whos e campaigns they bankroll have the courage and the wisdom to carry out th e recommendations contained in the Little Hoover Commission's report . There is reason fo r both to do so . Within unions there is a generational split . Older workers with fat retirements are protecte d by civil service seniority rules that shield them from layoffs . Younger workers lack tha t protection . To save jobs, young workers are more likely to want to embrace reforms . Union leaders need to pay attention . Yet so far, they appear tone deaf . They continue to rol l out the old misleading statistic that public employee retirements average "$24,000 a year ." Average is meaningless in this debate . Look at pension payouts for those who retired after a full career and after the big post-1999 pension enhancements were approved . Look at publi c -safety retirements across the board and some local governments that adopted pensio n formulas that outstrip even very generous state formulas . Democrats are facing a split between their constituents who are watching vital service s evaporate and their public employee union political allies, whose members benefit fro m exorbitant pensions . They should act in the interest of their constituents and the state . If they don't act aggressively to curb pension excesses soon, an aroused public will . The Bee's past stand s "A public pension feeding frenzy has increased retirement costs for local governments b y staggering amounts over the last decade . Cities and counties that approved generous retirement benefits when the stock market wa s booming now face mounting costs as the stock market drops . Meanwhile, the Legislature ha s approved new measures that would boost the retirement benefits even higher for alread y lavishly pensioned public employees ." - Sept . 19, 200 2 © Copyright The Sacramento Bee . All rights reserved. http ://www. sacbee .com/2011 /02/27/v-print/3431893/editorial-the-clock-is-ticking .html 3/11/2011 Day of reckoning on pensions - latimes .com Page 1 of 2 latimes .com/news/opinion/editorials/la-ed-pensions-20110226,0,7405680 .story latimes .co m Editorial Day of reckoning on pension s The Little Hoover Commission paints a bleak picture of what's ahead for state an d local governments in California . February 26, 201 1 The housing bubble and subsequent Wall Street collapse wreaked havoc on the nation's advertisemen t retirement savings, as many pension funds and 401(k) plans suffered losses of 30% or more . State and local governments are now facing huge unfunded pension liabilities, prompting policymaker s to scramble for ways to close the gap without slashing payrolls and services . But a new report from th e Little Hoover Commission in Sacramento makes a more troubling point : Many state and loca l government employees have been promised pensions that the public couldn't have afforded even ha d there been no crash . The commission's analysis of the problem is hotly disputed by union leaders, who contend that th e financial woes of pension funds have been overblown . The commission's recommendations are equall y controversial : Among other things, it urges state lawmakers to roll back the future benefits that curren t public employees can accrue, raise the retirement age and require employees to cover more pensio n costs . Given that state courts have rejected previous attempts to alter the pensions already promised t o current workers, the commission's recommendation amounts to a Hail Mary pass . Yet it's one worth throwing . A bipartisan, independent agency that promotes efficiency in government, the Little Hoove r Commission studied the public pension issue for 10 months before issuing its fmdings Thursday . Much of the 90-page report is devoted to making the case that, to use the commission's blunt words, "pensio n costs will crush government ." Without a "miraculous" improvement in the funds' investments, th e commission states, "few government entities — especially at the local level will be able to absorb th e blow without severe cuts to services ." The problem is partly demographic . The number of people retiring from government jobs is growin g rapidly, and longer life expectancies mean that a growing number of retirees will collect benefits fo r more years than they worked . But the report argues that political factors have been at least as importan t in driving up costs, starting with the Legislature's move in 1999 to reduce the retirement age for publi c workers, base pensions on a higher percentage of a worker's salary and increase benefits retroactively . The increases authorized by Sacramento soon spread across the 85 public pension plans in California . Compounding the problem, the state has increased its workforce almost 40% since the pension formul a was changed and boosted the average state worker's wages by 50%. Local governments, meanwhile , raised their average salaries by 60%. Much of the growth came in the ranks of police and firefighters , who increased significantly in number and in pay . http : //www .latimes .com/news/opinion/editorials/la-ed-pensions-20110226,0, 7067781,print ... 3/11/2011 Day of reckoning on pensions - latimes .com Page 2 of 2 There's nothing inherently wrong with generous pension plans . Pensions, after all, are just a form o f compensation that's paid after retirement, not before . The problem, particularly for local governments, i s that the plans are proving to be far costlier than officials anticipated or prepared for . By their ow n reckoning, the 10 largest public pension systems in California had a $240-billion shortfall in 2010 . When the funds don't have enough money to cover their long-term liabilities, state and loca l governments are compelled to increase their contributions . In Los Angeles, the report says, the city's retirement contributions are projected to double by 2015, taking up a third of the city's operating budget . It projects that governments throughout the state will have to raise theft contributions by 40% to 80 % over the next few years, then maintain that higher rate for three decades . The more tax dollars governments have to devote to pensions, the more they'll have to take from othe r programs or from taxpayers . That means more layoffs or pay cuts for public employees, higher taxes , fewer services, or all of the above . The situation won't be so dire if the plans earn more on their investments than expected . But with the plans typically counting on annual returns near 8%, or twice the "risk-free" level suggested by som e analysts,it seems just as likely that they'll earn less than that, forcing local governments to contribut e even more . The Legislature and some local governments have sought to ameliorate the situation by reducin g benefits for new hires and persuading current workers to contribute more to their pension funds . The commission's report, however, argues that these moves aren't sufficient . The savings from the lowe r pensions for new employees won't be realized for many years, and the increased contributions aren't nearly enough to close the funding gap . The only real solution, the report contends, is to reduce the benefits that current employees are slated t o earn in the coming years . That's hard to do . California courts have held that pensions for current employees can be increased without their approval, but not decreased unless they're given a comparabl e benefit in exchange . Nevertheless, the commission calls on the Legislature to give itself and loca l governments explicit authority to trim the benefits that current employees have not yet accrued, withou t touching the amounts they have already earned . It also calls for a hybrid retirement plan that combines a smaller pension with a 401(k) plan and Social Security benefits, as well as the elimination of a variety o f loopholes used to inflate pensions . The commission is right about the importance of reducing the liabilities posed by current employees . And though picking a fight with unions over unilateral reductions in pensions probably isn't the solution , the report should persuade both sides to do more at the negotiating table to prevent pension costs fro m swamping state and local budgets . As the commission notes, public employees in California enjoy som e of the most generous pension plans in the country . Those plans won't do them much good, however, i f their employer can't afford to keep them on the payroll . Copyright © 2011,Los Angeles Times http ://www.latimes .com/news/opinion/editorials/la-ed-pensions-20110226,0,7067781,print ... 3/11/2011