"Over the past few years the city has been on the forefront of pension reform, but that came with challenges from city employees and their bargaining unit. What are your thoughts and perspectives of the city's current pension reforms and negotiations with the different city union groups?"
No one should be surprised that the changes that are occurring in public employee pension plans are creating consternation and push back from public employee unions. Change never comes easily and when benefits that have come to be considered sacrosanct are put on the table, City Councils and City Managements become fair targets for complaints.
One needs to look at history to try to understand how we got here and why we need to make significant changes now and in the future.
Over many decades, city administrations around the state have dealt with employee salary negotiations in ways that, in my opinion, were not very transparent and certainly were not prudent. Frequently, when budgets did not allow for salary increases to meet the needs and demands of employees, benefits were enhanced instead. Techniques such as basing retirement benefits on the single highest salary year, as opposed to a three-year average, was a convenient method to provide more potential retirement income to retirees without forcing cities to provide immediate funding.
Another technique, used almost universally, was the payment by cities of 100% of the employee’s contribution to their retirement plans. This was the equivalent of a private sector employer paying the employee’s portion of the Social Security contribution.
While these changes were occurring, employee groups were negotiating higher percentage retirement benefits for each year worked. Over the years, earned benefits went from 1% per year, to 2%, to 2.5%, to 2.75% and in some cases to 3% per year. At the same time retirement ages went from 65, to 62, to 60, to 55, to 50, etc. For example, under these formulas, an employee under a 2.75% benefit at age 55 could retire on 82.5% of his final year salary after 30 years on the job; a 3.0% at 50 with 30 years of service could retire on 90%.
Because the cost of the benefit plans, regardless of the plan design, is dependent on investment results, cities now find themselves in a perfect storm. Generous benefits, rising incomes, stagnant sales and property taxes, and poor investment performance have all combined to make it impossible for cities to continue business as usual.
Now we are forced to start dialing back retirement ages, reduce the percentages credited, etc. Because we have a contractual and moral obligation to fulfill our promises to existing employees we are limited to asking them to contribute their employee share to the system. This makes the largest financial difference to the city immediately, and is the subject of current labor negotiations.
At the same time we must negotiate changes in our future retirement benefits for newly hired employees. This is the so-called two-tier retirement system. By introducing new rules, for new hires, we can begin to manage future costs. These changes must also be negotiated with the various bargaining units.
All Glendora citizens can be very proud of the way our city’s employees have risen to the economic realities we face. They recognize that they are very fortunate to have good jobs with excellent benefits. They also recognize that by each one making a relatively small sacrifice, the chances that we will have to have large staff reductions is minimized. Each member of the City Council and the administration has expressed our deep appreciation for their willingness to help.
We appreciate that these sacrifices are not easy. Each of us, individually and corporately, are dealing with the same problems. None of us caused the problems, but each of us is called on to help solve them.
* The views and opinions expressed in these articles are those of Doug Tessitor alone. They are not to be construed to represent official positions of the city or the opinions of any other council member.
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