I hear people bitching about tariffs raising the cost of living. No, it’s the cost of government that is raising the cost of living, especially in California.
It’s tough keeping anything affordable in California, Chico is a particularly egregious example. If you shop in Chico, you are paying for bad management and self-service Downtown, and that’s getting expensive. According to the latest reports from City Mangler Mark Sorensen, Chico revenues are flat, while expenses continue to go through the roof.
As reported in the Enterprise Record in in May of this year, “The Chico City Manager’s office anticipates flat revenues for the upcoming fiscal year (ending June 2025) while facing rising expenses due to inflation. Revenue for the upcoming fiscal year is estimated to be no higher than the $100.6 million reported for the previous fiscal year. A significant portion of the city’s funding (52%) comes from sales tax, and statewide projections point to a slight decrease (1%) in the previous year’s sales tax revenue, with only slow growth anticipated for the following year.”
Revenues are flat? But they told us Measure H was a big success, that the millions were rolling in, that the new revenues were being used for all that roadwork around town. In reality, most of that work is paid for with state and federal funds, like the state gas tax, and Americans with Disabilities Act funding. Most of the money from Measure H is being funneled into increasing payments toward the pension deficit.
Here’s a city report from 2022 with the details.
https://chico.ca.us/documents/Departments/City-Manager/Better-Chico-%E2%80%93-Join-the-Conversation/copy_of_city_and_calpers_3-2022.pdf
This report is a must-read if you want to understand how the public pensions are funded, and by whom. What is the UAL, or pension deficit?
Unfunded accrued liability (UAL) is the difference between what the pension plan is worth [what has been paid into it through employer – the taxpayers – and employee contributions] and what is expected to pay retirees. It estimates for current employees and recipients of deferred benefits, as well as retirees. The UAL for the City is about $150,769,372. The City cannot use bankruptcy as a means of relieving this shifting burden.
This “burden” has been created by unrealistic contributions, and over-generous salaries and benefits. Instead of demanding higher contributions from employees and basing salaries somewhere in the realm of reality, city management has made contracts that do not take our current financial position into consideration. When they want money, they tell us we’re in the City of Dire Straights, but when they are dealing with the employee unions behind closed doors, the sky’s the limit.
What has the City done to reduce the cost of employee pensions? You tell me. Here’s what they’re saying, which is completely misleading.
Beginning in 2011-2012, the City began negotiating lower wages with staff and paused cost of living increases for most employees to reduce what the City pays for CalPERS. In 2013-14 the City required employees to start paying some of the “normal cost” of their pension. The “normal cost” is the actuarial amount determined that is used to pay for active employee pensions. In 2015-16 employees became increasing responsible for paying some of the City’s share of pension costs and are now paying from 7.5% to 16.75% of their wages. In the 2020-2021 fiscal year, employees paid $1,020,000 of retirement that was previously paid by the City.
Here’s what really happened. In 2011/12, city council, led by then-council member Mark Sorensen, hired a guy out of Southern California for the city manager post – Brian Nakamura. Nakamura was what I call “an assassin” – he was brought in to cut staff, brutally, and get rid of any employees who were not considered to be part of the game. Sure, he cut “some” salaries, but he raised the city manager’s salary by over $20,000, up to over $200,000 a year. Now Mark Sorensen, who hired Nakamura at that unprecedented salary, is making over $211,000/year.
Nakamura did inform the public of the UAL, and the fact that neither management employees nor public safety were paying anything toward their own pensions. But the contributions he suggested were ridiculously small, and have remained that way – 7.5% – 16.75% of their salaries? And they expect the taxpayers to pick up the rest – the UAL – with interest.
“Has the City done anything else to be proactive about pension reform?” No, but they went about guaranteeing that they will get their sweet pensions without ever having to pay any reasonable share of the cost.
“The City created a Section 115 Pension Stabilization Trust to pay for future pension costs of employees. As of 1/31/22 there is $2,707,773 in this irrevocable trust account to pay towards future pension costs.” Remember this part, later we’ll see just where they get the money.
This report shuffles along through the barnyard. “Are there any additional ways the City can explore reducing pension costs?” And here begins the Big Lie.
“The City has explored Pension Obligation Bonds, which would allow the City to sell bonds to pay pension debt at a lower interest rate” Again, a lie. A Pension Obligation bond does not reduce the cost of pensions, it just shifts the entire burden, permanently, onto the taxpayers.
What they are not telling us here is that what they tried to pull – instituting a POB without an election – is illegal. They aren’t telling us that Howard Jarvis Taxpayers Association issued a Cease and Desist Order, threatening to sue the city of Chico for trying to institute an illegal tax.
This sounds like another chapter of Al Franken’s book, Lies and the Lying Liars Who Tell Them. That was a good read, until Franken himself became a politician and a lying liar. Oh well.
The report goes on to tell us about staff’s additional efforts to get us to pay their bills – “Additionally, staff continues to campaign for pension reform within California and has met with CalPERS executives and attended board meetings to ensure the City’s voice is heard on their desire for reform.” These are exactly the words late CARD manager Ann Willmann during her parcel tax campaign. It’s a campaign folks, run by the California League of Cities on behalf of their CalPERS addicted members.
And I’ll leave you with this little pack of threats – “Why can’t the city leave CalPERS?” This is how it cuts-and-pastes, but it’s all there, I don’t have time to fix it. A figure that really bothers me is the UAL they posted in this report, dated 2022 – $150,769,372. In 2023 they reported it was only $92 million? That’s another post, or you can figure it out for yourself. Paid down with “Surplus General Funds”? Where exactly would that come from?
- Why can’t the City leave CalPERS and create a new retirement system for employees?
If the City were to leave CalPERS immediately, money in CalPERS accounts would be placed in a trust to pay
current and future retirees. If the plan is only funded at 50%, payment to current/future retirees would be 50%
of what employees had originally been promised. This would likely result in litigation for the City.
If the City were to leave while paying retirees full benefits, a deposit would need to be made with CalPERS to
cover existing/future retiree benefits. Funds would be placed in an “exit trust” that would be considered
financially “safe” resulting in interest rates of 1-3%. This is opposed to the CalPERS rate of 7%. The amount of
the “exit trust” is required to be 4-6 time the UAL. (current UAL is $150,769,372). The deposit must be much
higher because the interest rate in the trust account is so much lower than CalPERS 7% rate. Once the City
leaves CalPERS, employee unions will negotiate a new defined retirement contribution.
Chico Taxpayers Association 