The Facts About Pensions

By Jane Sullwold

The issue of the cost of, and liability for, pensions and retiree health benefits provided by the City has arisen at every candidates' forum this year. But not everyone appears to appreciate the seriousness of the problem. So let's look at the numbers.

BENEFIT	AMOUNT	PERCENTAGE
Total General Fund expenses and	$71,559,652	100.00%
net transfers out
City payments to CalPERS for pensions	$12,082,061	16.88%
City payments to retirees under	$2,067,364	2.89%
pre-CalPERS police and fire pension plans
City payments to CalPERS for retiree	$2,555,039	3.15%
health benefit premiums
Total City payments for pensions and	$16,404,464	22.92%
retiree health benefits

Thus, according to the City's most recent audited financial statement, the City's unfunded liability for pensions and retiree health benefits approached $200 million by the end of 2010 -- and it is still growing:

BENEFIT	UNFUNDED LIABILITY
CalPERS pension plans	$94,550,165
Pre-CalPERS police and fire pension plans	$14,953,000
Retiree health benefits	$86,416,000
Total unfunded liabilities	$195,919,165

At the League of Women Voters candidates' forum on October 4th, I said that I found these numbers truly scary. And I do. Everyone wants, to use the buzzword preferred in political circles, a "sustainable" budget. But spending 20 percent of the City's general fund budget on pensions and retiree health benefits poses a clear and present danger to "sustainability." And doing nothing to reduce a liability rapidly approaching a quarter billion dollars is simply flirting with calamity.

I do not believe that the recent pension reform bill -- which applies primarily to newly hired employees -- will reduce significantly the amount the City currently pays each year for pensions and retiree health benefits. Nor do I believe that we can rely on CalPERS' superior investment management skills -- which produced a 1% return in the 12 months ended June 30, 2012 -- to make the unfunded liabilities go away.

I am sure that the Pension and OPEB Task Force will provide a menu of options for reducing both current spending and future liabilities for pensions and retiree health benefits. And I am heartened by assurances from our public employee unions that their members will work with the City to solve these problems. But I remain convinced that we cannot take any option off the table until it is too late for anything other than drastic measures.