Tulare County - Retired city and county employees are presenting a financial challenge to local governments already struggling in this tight economy.
All are paying more money into the Public Employment Retirement System to compensate for the decreased value of the system's investments. Some are also sharing part of increased health care costs for their retirees.
“We're like everyone else; the value of our fund dropped 25 percent,” said Tulare County Administrative Officer Jean Rousseau. “We're very concerned about its effect on future budgets.
“Unlike a lot of PERS agencies, we don't have a Cadillac plan,” Rousseau said, noting that the county's pension plan is 2 percent at 50, which means, for example, someone who has worked for the county for 20 years would receive 2 percent of their salary for each of those years – resulting in 40 percent of their salary as an annual pension.
“We're still struggling,” he added. The county pays $20-$25 million a year into PERS, which includes its current employees as well as its retirees. “We, as any employer, make matching payments.”
“A lot of the cities in this county have better retirement plans – or did,” Rousseau said. “What agencies were doing up and down the state was recruiting for better employees.”
Rousseau said the board of supervisors didn't use benefits as a recruiting tool. “The board didn't think it was sustainable. I think the board has taken a prudent, fiscally responsible approach.”
As a result of this approach, while Fresno County has a pension debt of $500 million, Tulare County has a current debt of $11 million, but plans to make a $5.7 million payment in August and a $6.3 million payment in August 2011 to pay off that debt.
Tulare County doesn't offer post-employment medical insurance and as a result, “health care is not an issue with the county,” said Rousseau.
Visalia
The city of Visalia needs to pay $2.6 million into the PERS fund this year to help make up for the decreased value of investments in the recent economic downturn.
The city will be paying a similar amount “for at least 15 years unless we have some gains in our PERS interest,” said Eric Frost, the city's administrative services director.
About 77 percent of that money is for the pensions of current employees; 23 percent is for those already retired.
“They look at what your payroll is and decide what percentage you have to put in the pot,” Frost said.
The city's PERS plan is 3 percent at 50 for its safety (police and fire) employees, and its miscellaneous employees hired before July 2008 are at 3 percent at 60. New miscellaneous workers are hired at the rate of 2.5 percent at 55.
Health insurance for retirees is a heated issue in Visalia, where the city subsidizes health insurance for its qualifying former employees. This policy is based on the city's administrative policy which reads, “Retirees are eligible for medical and vision at a cost determined each year by the city.”
“We spend about $2 million a year on retirees' health benefits,” said Frost.
Many former city employees contend that the city promised them it would pay for their health insurance when they retired.
“The only promise the city has made is the city would give retirees access to our medical plan,” Frost said. “Most other cities allow their employees access to health benefits but they do it at cost. We do it at subsidized cost.”
Tulare
The city of Tulare pays its public safety employees 3 percent at 50, and 2.7 percent at 55 for its other employees, according to City Manager Darrel Pyle.
Tulare is among the cities that provides its retirees access to health insurance at cost. “Our retirees have access to our health care program but they pay full cost,” said Pyle. “A handful of retirees choose to keep the benefits, but they pay the costs so it has no financial impact on the city.”
Dinuba
“We have probably the most basic plan, 2 percent at 55 for all city employees,” said City Manager Ed Todd about Dinuba's PERS plan. “Under the plan, they get 40 percent of their highest annual salary as their retirement as long as they are alive.”
The plan calls for employees to pay into it for 20 years. That money is invested and the benefits are paid to the retiree. “In theory,” there should be enough money to pay retirement benefits, Todd said. “In practice, cities pay at least half of it, generally 7 percent of an employee's salary.
Dinuba also contributes to its retirees' health insurance.
“In our city, if you work here 15 (continuous) years and have reached retirement age, then we will pay your medical insurance up until the age of 65, basically for 10 years, then you go on Medicare,” Todd said. “I think at this point, we only have one or two employees (in that category).” He added that the city budgets $75,000 annually for its retiree health benefits, even though the actual expense is much lower.
Porterville
The city of Porterville pays into PERS at the rate of 3 percent at 55 for its public safety workers and 2 percent at 55 for its miscellaneous employees.
The city subsidizes a portion of retirees' health care costs up to age 65, said Patrice Hildreth, the city's administrative services manager. The formula is based on service time and age.
Lindsay
The city of Lindsay pays into PERS at the rate of 2 percent at 55 for its miscellaneous employees and 3 percent at 55 for its safety workers, according to City Manager Scot Townsend.
Lindsay provides 50 percent of the health care benefits for its retirees, 50 years of age and older, who have worked for the city for at least 15 years. This benefit, which lasts until the retiree reaches the age of 65 and qualifies for Medicare, has not had a major financial impact on the city. “There are only two who have taken advantage of this insurance,” said Townsend, noting that the cost to the city is about $9,400 a year.
Exeter
The city of Exeter is also with PERS. Its plan is 3 percent at 60 for its miscellaneous employees and 3 percent at 55 for its safety employees, according to Acting City Administrator Felix Ortiz, who said that the city currently has two retirees receiving PERS benefits.
The city doesn't provide any health benefits to its retirees. “They can go with the same company, but they won't be grouped with the city,” Ortiz said.
Farmersville
The city of Farmersville PERS plan is 2 percent at 55 for its public safety employees and 2 percent at 60 for its miscellaneous employees. The city joined PERS in 1998 and “has played catch-up ever since,” said City Manager Rene Miller.
Farmersville pays “22 cents
on the dollar” for its employees, according to Miller. “When
the stock market drops, the 22 cents may go to 30 cents on the dollar.”
The city doesn't provide health benefits to its retirees. “I won't
let them do that,” Miller said. “We can't afford it. Once
they go, they're on their own.”
Woodlake
The city of Woodlake is in PERS for both its retirement and medical plans.
“In Woodlake, the employer (the city) pays the employees' share,” said City Administrator William Lewis.
In the 1990s, the city didn't have to make any payments to PERS, “because the stock market was doing so well,” Lewis said. “At the time, they were beating the PERS projections. Now, it's the opposite.”
The stock market decline is expected to cost Woodlake $100,000 a year, “probably for 15 to 20 years,” Lewis said. The city's regular annual payment of about $150,000 has increased to $250,000. Nineteen of the 49 people in the program are retirees.
The city pays about $110 a month to partially subsidize insurance for its retirees. “Since we are with PERS, statutorily they are allowed to opt into the PERS program, with a required contribution from the city,” Lewis explained. He added that only one or two retirees are in the program.
“We've only been in PERS Medical for about five years,” he said. “They (PERS) went back to all employees to ask them if they wanted to be in the program. A lot of folks already had other insurance.”
Pension Reform?
There are at least two proposed ballot measures that would reform pensions in the state.
“The measures would basically mandate maximums to the formulas,” Hildreth said. “You can still maintain the system, just reduce it to 2 percent. It would save the cities money.”
“This would potentially change pensions to reflect how things are now,” Rousseau said, estimating that the rate would be 2 percent at 57. “That's what was historically in place for 40 years, up until the last 10 years.”
The proposed measures are complicating things in the city of Tulare.
“We're working right now on a new formula for new hires,” Pyle said. “We can come up with one and then the voters will come up with something else entirely.”
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