A group of city leaders from throughout Santa Clara County
– including Morgan Hill Mayor Steve Tate – unanimously agreed to
pursue a two-tier retirement system earlier this month. That’s a
good start. Reigning in retirement costs is perhaps the biggest
challenge facing cities throughout the state.
Pension costs continue to rise
A group of city leaders from throughout Santa Clara County – including Morgan Hill Mayor Steve Tate – unanimously agreed to pursue a two-tier retirement system earlier this month. That’s a good start.
Reigning in retirement costs is perhaps the biggest challenge facing cities throughout the state.
The city of Orange will face bankruptcy if it cannot get control of its share of pension costs. Its contribution to the retirement plan has risen steadily from $3.6 million in 2002-03 to $13.5 million today and could reach $23 million in 2013-14. While the city of Morgan Hill is not suffering as dearly, its costs could nearly double to $4 million in 2014.
Good start, but not enough
Unless changes take place, cities like Morgan Hill have a tough road ahead. With the economic downturn, the city’s liability with the California Public Employee Retirement System, which was overfunded by almost $10 million in investment earnings in 2000, is underfunded by $10.8 million this year. That’s a $21 million drop in seven years. That amount will continue to increase, too, during the financial market fallout, Morgan Hill Finance Director Kevin Riper told reporter Natalie Everett.
The idea of the two-tier system is to reduce the amount the city spends on retirement benefits to CalPERS, the largest pension system in the nation, by creating a second tier for new employees.
While the agreement Sept. 10 by the group of regional city leaders is a good start, it’s not nearly enough.
Two-tier system is a must
The time is now to implement a two-tier benefit and salary system for city workers. Current employees would keep their salary scales, benefits, and retirement packages, but new workers would have much more reasonable compensation packages in line with what the private sector offers.
It’s time for the unions to take a brave stance. Cushy retirement benefits heaped on the backs of taxpayers, many of whom have taken pay cuts, been forced to take furlough days or lost a job, are not fiscally sustainable.
