Guest opinion: City is ahead of state on pension reform
Last week, Gov. Jerry Brown signed into law AB340, a historic bill reforming California's pension system. This law will save California taxpayers billions and begins the process of restoring financial stability to the state's pension funds. Credit rating agencies have already reacted positively to the news. The bill received overwhelming bi-partisan support in the state legislature.
The League of California Cities played a critical role in formulating this bill and shepherding it through the Legislature, making sure that its provisions were going to result in real savings for local governments. I have been very involved in League of California Cities discussions regarding pension reform and have supported its pension reform efforts in Sacramento. I've done this because I understand the critical importance of fully funding our retirement obligations and the impact this has on the city's budget. I applaud the governor, Legislature, and League of California Cities on this ground-breaking achievement. I also know that additional reforms are needed to ensure sustainable budgets over the long term. I will support the League's ongoing efforts to bring these reforms into law.
Menlo Park has already implemented many of the reforms contained in the new law, and gone beyond them in many instances. Menlo Park employees pay a substantial portion of their pension costs. The City Council negotiated scaled-back "two-tier" retirement formulas for all four bargaining units to control long-term costs, and a "cap-and-split" on the employer contribution as well as greater employee contributions to control short-term costs. In addition, the council paid off the "safety side fund" which was causing high employer contribution rates, and by doing so significantly reduced the life-cycle cost of the obligation. The city's pension obligations are now almost fully funded.
Menlo Park is in good shape now regarding not only pensions, but other post-retirement obligations as well. These other (primarily limited health care coverage) obligations are also fully funded — the council established a separate trust fund to ensure sufficient reserves on an ongoing basis (and it doesn't hurt that we earn a better interest rate than for general reserves). These reforms position Menlo Park among the leading California cities in prudent financial management.
It should be noted that all these reforms were accomplished by actions of the City Council, independent of Measure L. Six months prior to Measure L's passage, the council imposed a two-tier, "2 percent at 60" pension formula on SEIU, the city's largest union. SEIU represents 83 percent of the employees targeted by Measure L. This action, taken after months of difficult negotiations, was largely ignored by Measure L's proponents and the press. I and other council members at the time did not trumpet this accomplishment out of respect for the employees. In hindsight, the community would have benefited from a greater awareness of the council's action.
I have been asked, "If you support pension reform, why did you oppose Measure L." First, by imposing 2 percent-at-60 on SEIU, the council had already done the heavy lifting on the issue. Secondly, the tone of Measure L, and rhetoric from its chief proponents, were so mean-spirited as to become a drag on employee morale. Thirdly, the "ballot box budgeting" aspect of the measure is a terrible precedent — this is the kind of measure that has the state budget in such a mess. Fourth, it was a huge drain on the city attorney's time when there are many other critical priorities. Finally, the single focus of the measure on a specific retirement formula fails to recognize that it is the overall compensation package that is negotiated and allows Menlo Park to attract and retain quality employees that provide the high level of service that Menlo Park residents demand and deserve.
Kelly Fergusson is running for a third term on the Menlo Park City Council.