Almanac

Viewpoint - August 16, 2006

Editorial: Fire board tackles pensions

Our hats are off to Peter Carpenter, a member of the Menlo Park Fire Protection District board, for continuing to bring up the very difficult issue of funding the huge and ever-growing pension costs that confront this district and virtually every other public safety operation in the state.

(The board is inviting members of the public to comment on what they think the board should consider as it negotiates a new labor contract this year — an agenda item pushed by Mr. Carpenter in the hopes that a public discussion on pensions and benefits will take place — at its meeting August 15. The meeting begins at 7 p.m. in the board room at district headquarters, 300 Middlefield Road in Menlo Park.)

This "rock and a hard place" pension problem is going to continue to squeeze the finances of local districts until something is done. But until now, at least, the districts fear that if they lower retirement benefits they will lose employees to other areas that maintain the high-priced benefits.

Here is what the Menlo Park district is up against:

In 2001-02, its pension costs were $290,000; in 2005-06, the costs were $3.5 million, or 18 percent of the district's $19.3 million budget.

The reason: In July of 2002, the district increased retirement benefits for firefighters 50 or older with 30 years service from 60 percent of their highest salary to 90 percent until death. The enhanced benefits were being awarded to increasing numbers of emergency workers in the state — a result of the state Legislature's 1999 approval of a bill allowing public agencies to increase PERS benefits to that maximum level.

Mr. Carpenter has called the escalating pension costs "unsustainable," and although he supports maintaining benefits for all current firefighters, he believes that it is time for the district to adopt a two-tiered system, with less-generous pension benefits for new employees. Unions have adamantly opposed such a plan, and so far, at least, no action has been taken.

In prior reporting on this issue, the Almanac has identified a near "perfect storm" of circumstances that together have stymied action on this costly issue:

• After 9/11, state legislators, including Sen. Joe Simitian, have shown little enthusiasm for tackling the issue, perhaps because they would be battling the state's strong public safety unions. Most state officials say local districts asked for the higher benefits during the state's high-tech boom, and hence put the burden on themselves.

• Local districts, which need to offer competitive pay and benefit packages to attract and keep public safety personnel, are reluctant to reduce benefits in any way, fearing they will lose employees to other districts.

• Firefighters and other public safety employees are hardly eager to give up a benefit they believe they deserve after 30 years of service in an often dangerous occupation.

• Finally, this imbroglio comes at a time when defined benefit pension plans, such as PERS-system public pensions, at all levels of government are receiving more scrutiny as new accounting rules require local governments to cover such unfunded liabilities far into the future. The rules can add millions to already tight local budgets if public agencies are forced to pay for this mandate.

At the very least, the Menlo Park fire board's decision to discuss pensions is admirable. There are numerous ways to begin reducing this benefit cost, including dropping the 90 percent guarantee to 80 or even 70 percent.

Another idea advanced by board member Rex Ianson during last year's election campaign would require firefighters to pay more into their pension plan when the district is required to pay more into the PERS system. Mr. Ianson, a retired firefighter with more than 30 years in the district, could convince his former union to help reduce retirement costs.

If no action is taken, escalating pension costs will continue to force public safety programs to eat up a larger and larger share of local budgets, and ultimately will force agencies to ask voters to approve tax increases to pay for them. At that point, we may begin to see real pension reform.

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