MUNICIPALITIES SAVE MILLIONS CURTAILING PENSION PERK

By Trent Seibert 12:01a.m. Jan 10, 2014

While battles rage across the state and nation over benefits for retired public employees, cities and counties in California have racked up almost $500 million a year in savings by curtailing one little-known pension perk.

Most pension plans include both an employer contribution and a matching payroll deduction from employees to save for retirement. Over the years, elected officials had agreed to cover up to 100 percent of the city and county employees’ assigned contributions — a practice that is falling out of favor, according to a U-T Watchdog review of new data from the State Controller’s Office.

Taxpayers in California’s 58 counties paid more than $660 million in the pickup costs in 2009, according to the Watchdog review. That dropped to $452 million in 2012.

Taxpayers in California’s cities paid $683 million in pickups in 2009, falling to $423 million in 2012.

Many aspects of public employee pensions — including payout amounts promised upon retirement — have long been considered inviolable guarantees by the state Supreme Court, driving cities across the state into bankruptcy in recent years.

But the employee contribution for retirement savings has quietly proved to be a cost that can be pushed back onto the workers with routine labor negotiations, saving taxpayers hundreds of millions of dollars per year.

The trend has played out in San Diego County as well, more so in city government than county.

Taxpayers in San Diego County cities picked up $45.9 million in 2009 for those retirement costs. That dropped to $6.7 million in 2012, records show. County taxpayers paid $63.2 million in 2009, dropping to $46.9 million in 2009.

“The trend showing lower employer pickup of employees’ portion of retirement costs is encouraging,” said Felipe Monroig, president of the San Diego County Taxpayers Association. “Local governments and taxpayers should expect employees to pay their full, required share of costs towards retirement.”

Of 16,379 city employees in 2012 working at 18 cities in San Diego County, 6,118 got some kind of pickup in 2012 — that’s 37 percent.

The practice remains more common for San Diego County employees. In 2012, 86 percent of the 18,500 people who worked for the county for some portion of the year got taxpayer help to cover their own retirement contributions.

That there is less of a drop-off in the county compared to cities in San Diego may be because there are more public safety personnel employed by the county — sworn officers have, in many cases, avoided cuts to the pickup. San Diego County also has more union bargaining units than other municipalities in the county.

San Diego lags behind other counties statewide in giving up the perk, but county spokesman Michael Workman said that the pickup is being reduced.

“Under the terms of labor agreements reached in 2013, effective Dec. 27, 2013, the offset was reduced by one-third for approximately 13,000 of the employees,” he said in an email. “Agreements are in place that effective June 9, 2017, eliminate the offset for approximately 9,000 County employees.”

The numbers are dropping statewide in large part due to such contract changes and renegotiations. Indeed, in recent years, city managers and elected officials have used public outrage over these kinds of benefits as a negotiating tool to help roll back the pickup. Leaders in Sacramento have also pushed efforts to curtail the perk.

California’s pension systems require all public employees to pay about 8 to 10 percent of their gross pay toward their pensions through payroll deductions.

Unions have negotiated to have the governments they work for cover all or part of the employee share. This was seen as a way to increase employee compensation without increasing payroll, unemployment and other taxes, said Mike Zucchet, the general manager of the San Diego Municipal Employees Association.

Last year, state lawmakers said that agencies belonging to the California Public Employees’ Retirement System could no longer offer “pickups” to anyone hired after Jan. 1, 2013. That rule applies to 17 cities in San Diego County that belong to the system. San Diego city and county each have a separate retirement program.

The reversal of the pickups is troubling, according to Zucchet, because the unions and management negotiated them in lieu of pay hikes.

Zucchet said the change is happening without the public understanding the overall dynamic, with some residents angry that public workers were getting generous retirement packages and contributing little or nothing toward them.

“The (pickup) didn’t come about in a vacuum; the unwinding came in a vacuum, with some people saying, ‘That’s wrong,’ ” Zucchet said. “The unwinding didn’t come with any agreements saying, ‘We’ll go back and increase your pay instead.’ They just simply unwound the pickup.”

The employee pickups for individuals range from as little as $2 for the year in 2012 for four San Diego library aides to tens of thousands of dollars for others.

Taxpayers picked up Sheriff Bill Gore’s employee retirement contribution to the tune of $17,186 in 2012, the controller’s data shows.

Gore told U-T Watchdog he was unaware of how much of the perk he gets. His salary and benefits are set by county leaders and are out of his hands.

“It’s all done by the county,” he said.

Not all cities have dialed back the practice.

Nearly 100 percent of El Cajon’s 465 municipal workers got the perk in 2012, from a deputy city manager who got $5,808 of his share of retirement contributions covered, to a custodian in the city’s public works department, who received a $22 pickup.

In Encinitas and Santee, 97 percent of municipal workers got the perk.

Municipal workers in the cities of Coronado, Poway, La Mesa, Lemon Grove and San Marcos do not get the perk.

The shifting of more retirement contributions to employees is not enough to hold back growing pension costs, warns former San Diego City Attorney Mike Aguirre.

“You’ve got a whole bunch of people drawing from the punch bowl and other people waiting in line and there’s not going to be any punch by the time they get there,” Aguirre said.

The dip in pickups won’t mask the reality that taxpayers continue to be on the hook for growing overall pension costs, Monroig said. Increasing pension costs means less money available for public safety, parks and other services, he said.

http://m.utsandiego.com/news/2014/ja...ns-curtailing/