City Pension Standards
The seven City Managers in San Joaquin County and the County Administrator meet monthly to discuss issues of mutual interest. Yesterday, we discussed a proposal developed by the San Diego City/County Management Association. This proposal discusses the elephant in the room of every city labor agreement--our inability to continue supporting our current pension plans. As I've noted before, not only are these benefits unsustainable, government workers are getting vilified in the media for having defined benefit plans far superior to anything in the private sector.
As noted in their report which you can access here:
Their group is recommending a second tier pension offering that could be implemented by the great majority of cities. This pension program would not affect existing city employees who have vested rights to the current pension program, but would affect new employees after a date certain and be both sustainable and defensible.
The study goes on to provide a great background on the evolution of government pension systems and how they've changed over the years. It goes on to support the continuance of defined benefit versus defined contribution programs for delivering benefits as defined benefit programs are professionally managed. They also offer lower fees and cover disability retirements and death benefits--which are not typically provided in defined contribution programs.
Essentially it recommends a return to the benefits that were available pre-1999 when most of the pension benefits were upgraded in conjunction with a once in a generation surge in the stock market. I realize that this will not sit well with many on opposite ends of the issue. I'm certain that labor groups will be reticent to reduce benefits for future employees and be concerned about the resentment that might emanate from those hired under the new plan. I'm sure there will also be many who believe that government employees should be relegated to the same defined contribution plans now common in the private sector.
There is no doubt in my mind that you'll be hearing a lot more of this debate in the near future. As our available revenues continue to flounder and health and pension costs continue to increase, we'll be faced with very difficult budget decisions in the future. In my mind, updating the pension system is a necessity and the sooner we begin to face this issue, the sooner we can resolve it and move on to other budget challenges.
As noted in their report which you can access here:
Their group is recommending a second tier pension offering that could be implemented by the great majority of cities. This pension program would not affect existing city employees who have vested rights to the current pension program, but would affect new employees after a date certain and be both sustainable and defensible.
The study goes on to provide a great background on the evolution of government pension systems and how they've changed over the years. It goes on to support the continuance of defined benefit versus defined contribution programs for delivering benefits as defined benefit programs are professionally managed. They also offer lower fees and cover disability retirements and death benefits--which are not typically provided in defined contribution programs.
Essentially it recommends a return to the benefits that were available pre-1999 when most of the pension benefits were upgraded in conjunction with a once in a generation surge in the stock market. I realize that this will not sit well with many on opposite ends of the issue. I'm certain that labor groups will be reticent to reduce benefits for future employees and be concerned about the resentment that might emanate from those hired under the new plan. I'm sure there will also be many who believe that government employees should be relegated to the same defined contribution plans now common in the private sector.
There is no doubt in my mind that you'll be hearing a lot more of this debate in the near future. As our available revenues continue to flounder and health and pension costs continue to increase, we'll be faced with very difficult budget decisions in the future. In my mind, updating the pension system is a necessity and the sooner we begin to face this issue, the sooner we can resolve it and move on to other budget challenges.
posted by City Manager @ 6:45 AM
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