I was glad to see Ray Schimmel’s letter in Sunday’s paper (2/22/26) – “No, everything is not OK with Chico’s Downtown.” Yes, the kiosks are just another nail in Downtown’s coffin. And just another obvious shake down by city management, desperate for revenue to pay their own salaries and benefits, including the pension deficit.
Pension deficit is created when employees do not pay a rational share of their pension expense. Most cities in California allow employees to pay a small share, while the cities pay a trifle more, and trusts CalPERS to make up the rest with investments on the stock market. When the market doesn’t pay, the debt accrues with interest – and there’s the deficit.
Of course the deficit also goes up with every new hire and salary increase.
So, even though most cities, including Chico, have created pension payment plans, with increasing “catch-up” contributions every year, cities all over California, including Chico, are watching their deficit go up very drastically every year.
The problem is, Chico employees, like employees in other cities, are given “defined benefit plans”, aka, “traditional benefits” in their contracts. The terms – such as salary, and the percentage of the employee share of benefits – are negotiated by council and the city manager.
What is a “defined benefits plan”? From Investopedia – Defined-benefit plans provide eligible employees with guaranteed income for life when they retire. Employers guarantee a specific retirement benefit amount for each participant based on factors such as the employee’s salary and years of service.
Wow, guaranteed for life, that’s a promise! The AI summary adds a very important point –
Defined benefit (DB) plans, or traditional pensions, guarantee a specific, formula-based monthly income in retirement, with employers bearing all investment risks.
Yep, the employers – the taxpayers – bear all the risks. Including CalPERS poor returns. While CalPERS has had some excellent years, they’ve had a lot more bad years, and remain at only 70% solvency. Meaning, the taxpayers have to come up with the rest of that money. Plus interest.
I feel the answer is to switch to “defined contribution plans”. Really Pollyanna? What’s defined contributions? Well thanks for asking!
Defined contribution (DC) plans, such as 401(k)s, are employee-funded accounts where final benefits depend on contributions and market performance, shifting investment risks to the employee.
Defined-contribution plans are funded primarily by the employee. The most common type of defined-contribution plan is a 401(k). Participants can elect to defer a portion of their gross salary via a pre-tax payroll deduction. The company may match the contribution if it chooses, up to a limit it sets.“
While that’s a no-brainer as far as I’m concerned, here’s a point I had not considered – defined benefits plans are more expensive to administer, the cost of which, is of course passed onto the taxpayers.
From investopedia – https://www.investopedia.com/ask/answers/032415/how-does-defined-benefit-pension-plan-differ-defined-contribution-plan.asp#citation-2
“These key differences determine which party—the employer or employee—bears the investment risks and affect the cost of administration for each plan.
With defined benefits plans, “Employees have little control over the funds until they are received in retirement. The company [CalPERS] takes responsibility for the investment and distribution to the retiree. That means the employer [taxpayers] bears the risk that the returns on the investment will not cover the defined-benefit amount due to a retired employee.
Here’s the whammy – “Because of this risk, defined-benefit plans require complex actuarial projections and insurance for guarantees, making administration costs very high.”
Since defined contributions plans shift the risk to the employee, “As the employer has no obligation toward the account’s performance after the funds are deposited, these plans require little work, are low risk to the employer, and cost less to administer.
The city will tell you this is not possible, that there’s no way we can get out of CalPERs, blah blah. We will probably have to continue to pay what we owe on past, retired employees, but we need to put pressure on council to switch whenever there is a contract negotiation or new hire. Starting with whomever they plan to hire for City Manager.
And stop giving raises and hiring new positions.
And we need to discuss the conflict of interest created here, with council members receiving huge campaign contributions from the employee unions. That is as obvious as the stinking heads of a fish that smells so rotten… oh yeah, that’s the sewer boiling up under Downtown Chico…
Chico Taxpayers Association 
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