In the late 1990’s, Governor Gray Davis and other union-friendly legislators set up the current pension system, agreeing to “defined benefits”. Public employees had previously been given a “defined contribution” system. The difference being, with a “defined contribution” system, the employer agrees to pay a certain amount, with a “defined benefit” system, the employer agrees to provide specific benefits, no matter the cost.
About 2006 an “MOU” – memo of understanding – was approved by the sitting Chico City Council, with the recommendation of then-city manager Tom Lando, to “attach salaries to revenue increases but not decreases…” Read that again – “but not decreases…”
Does that sound right to you? Think about that – give them raises when we’re flush, but no “adjustments” when we’re bust, just lay people off and cut services. That’s been the pattern in Chico for 15 years now. After Lando floated that turd, his salary went from about $65,000 a year to over $150,000 within a couple of years. His successor came in at $190,000/year.
Council handed out raises of 14%, 19%, 22%, until that memo was outed to the public and the taxpayers started to howl about it. But too late – City of Chico salaries had progressed well over $100,000 for management and public safety, and other salaries were not far behind. Council approves automatic raises in the contracts so the salaries just keep going up. Even though former city manager Dave Burkland agreed to take a lesser salary than his predecessor, our current city manager now makes over $200,000/year. Add his benefits package and he is taking almost $300,000.
When the public found out about this scheme the city dumped that revenue-based raises mechanism, but came up with something better – “the employer paid member contribution.” That meant, the city not only paid a share of the employee’s benefits, but paid a portion – in some cases the entire portion – of the employee’s share as well.
This finally ended a couple of years ago, when, under intense criticism, those staffers – public safety and city management – agreed to pay their whole portion. And, hold onto your hats – about a year ago, these people even agreed to pay 3% of the “employer share.”
Excuse me, my hat didn’t even jitter on that, because that makes the employee’s total share less than 10 percent. Anybody who has been a member of CalPERS for 15 years is a “classic member” and pays only 6%, plus that extra 3% – 9%, for a pension of 70 – 90 percent of their highest year’s salary is absolutely RIDICULOUS.
Meanwhile, the employer share has increased and increased, not to mention, the employer is making altogether separate payments toward the deficit, by way of the newly established “Pension Stabilization Trust.”
So, I imagine you saw this article in the paper recently.
This article gives a good historic overview of how the pension deficit has grown. I call it “rabbit math” – first they based the contributions on the employees’ salaries, and then they jacked up employee salaries.
I wonder how many other cities in California used Tom Lando’s ploy of attaching salaries to city revenue increases and then going on a development binge. When overdevelopment finally tanked the local market a few years later and revenues plunged, the salaries, benefits, and automatic raises, stayed in place. Salaries got higher no matter how revenues dipped for Chico. And the pensions and city contributions are based on the salaries.
Getting dizzy yet? Maybe a little pissed off? Well this is where we’ll close and pick it up again tomorrow.
