RLACEI

LEGISLATIVE REPORT:

Pension Law and Policy,
By Michael Karsch,
Legislative Representative

 

The California Legislature has completed its first year of the current two-year Legislative Session, 2019-20. The State Worker reported that three bills affecting retirees’ pensions, worker’s compensation and legal privileges in union negotiations had broad support in the Legislature but were held over to next year, at the request of Gov. Gavin Newsom. The bills would have made cities responsible for mistakes that inflate retirees’ pensions, expanded workers’ compensation benefits and give broad legal privileges to communications between unions and workers. The article reports that there was concern about increased public spending. These bills do not appear to affect the City of Los Angeles.

The following are four stories in September 2019 about municipal pension issues across the United States:

  • Warwick, Rhode Island, the second largest city (population 82,672 as of 2010 census) in that state, reports an unfunded liability for employee pensions and other retirement benefits, estimated at $860 million, as reported by the Providence Journal. That city has a mayor and a council president like we have in Los Angeles. The Council President, Steve Merolla, feels this is a crisis after reviewing actuarial reports and other sources. He describes that city’s approach as “pay-as-it-goes” which, he claims, doesn’t involve setting aside money for long-term retirement costs. The Mayor, Joseph Solomon, isn’t comfortable with Merolla’s “alarmist” remarks. Solomon says the city can save some money by reducing the number of employees and by reducing some benefits. The city has 711 active employees and is supporting 938 retirees, according to an actuary, who added that this is not sustainable. The mayor’s assistant said, “Pay-as-you-go” is the right way, and is like a “homeowner’s mortgage obligation,” a comparison that has been made by other analysts on this subject matter.
  • The Ohio Public Employees Retirement System recently voted to ask legislators to allow the pension fund to freeze the cost of living adjustment in 2022 and 2023 for all retirees and delay the COLA for two years for all new retirees. As reported by the Dayton Daily News (September 26, 2019), these changes are intended to wipe out $3.44 billion of $24 billion in unfunded liabilities. The pension’s investment fund lost 3.38 percent in 2018. Their losses are spread over multiple years in a “smoothing” method. The second largest pension system in Ohio, the State Teachers Retirement System, eliminated its COLA in 2017.
  • In California, there is a shortfall in Palo Alto, but Rancho Mirage is fully funded. Palo Alto is behind $455 million in what the city owes CalPERS for supporting its share of pension benefits. The Daily Post reports that the city set aside 62 percent needed to cover for police and fire pensions, and 66 percent for other city pensions.
  • Rancho Mirage has been one of the few CalPERS cities to fully fund its pension liability. The city will pay just under $893,000 from its reserve funds to CalPERS, and will then have $67.6 million left in its reserves. Rancho Mirage has a full-time population of just more than 18,000 people and a daytime population of almost 30,000.
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