Sunday, June 18, 2017
[Marin County] Marin IJ Editorial: Report provides pension facts public should know
The 2016-17 Marin County Civil Grand Jury has performed a public service, preparing a thorough study of the state of local public agencies’ pensions. It also has echoed previous years’ grand juries in urging cost-cutting reforms.
Will this grand jury’s conclusions — including a jaw-dropping summation that the local pension-obligation debt totals $1 billion — make a difference?
So far, similarly sobering financial advice hasn’t helped much, as the grand jury concluded.
But the report does a good job of putting the long-term fiscal dilemma in perspective.
“These retirement benefits have accumulated over decades and are now coming due as an aging workforce feeds a growing wave of retirements,” the May 25 report says. “The resulting financial demands will place stress on the budgets of public agencies and likely lead to reduced services, increased taxes or both.”
Rising pension costs have helped fuel the increased number of local tax measures voters have been asked to approve. Many are presented with warnings of deep cuts in important local services unless they are approved.
But often unmentioned by politicians and bureaucrats is that the pressure to raise taxes is a fiscal ramification of the county’s, cities’ and districts’ growing expense to cover pension checks issued to a growing number of retirees and to cover future obligations.
It has been a financial perfect storm for municipalities.
When many of these pensions were established, public jobs were known to pay less, but had benefits that were better than in the private sector.
Over the years, during tight budget periods, most agencies, instead of increasing salaries bolstered pension benefits, expecting those costs would be amply covered by investment returns. But salaries have also grown as agencies’ have faced the challenge of retaining and recruiting talented workers in a competitive market.
These two influences collided during the recession — investment returns plummeted and the number of retirees swelled, often exceeding the number of current workers and often retiring earlier and living longer.
The result is more and more of agencies’ revenues are needed to cover pension promises — actually, contractual obligations.
Jobs have been cut from budgets. Public services have been reduced. Fees and taxes, from local water bills to sales tax, have been increased because taxpayer dollars have to make up what investment returns no longer cover.
The grand jury report provides Marin taxpayers with an agency-by-agency look at pension challenges.
The grand jury has made several recommendations, among them that the county should form a commission to review possible pension solutions and propose cost-saving alternatives, such as 401(k)-type plans that the private sector turned to years ago. That switch would reduce the risk to taxpayers, establishing a fixed cost instead of one that swings with investment trends.
Public unions have steadfastly resisted this change. They make a good case that workers have relied on and worked for the promises made in their contracts.
The grand jury also recommends that every public agency in Marin publish long-term budgets, including a report on the percentage of total revenue that will be needed to cover pension costs.
Taxpayers deserve to know this information, whether it’s from city hall, the fire department or the school district. This information should not be presented in a way that only an actuary can understand, but in a simple dollars-and-cents manner.
The grand jury also does taxpayers a public service by asking almost every public agency in the county to respond to its report, meaning that these issues will be on their agendas for open and public review.
The grand jury’s recommendation that the county form a special commission to consider possible alternatives is more troubling, as the county hardly needs another standing commission. Other agencies’ formation of such special committees has done little to reduce short- or long-term costs, mainly due to their composition and limitations on their assignments.
We question whether a county commission would be any different. We also wonder: When will politicians who put tax measures on the ballot — and public services on the line — be more forthright in telling the public that rising pension costs are a big factor forcing them to ask taxpayers to pay more? Thanks to the grand jury, those figures will be a lot easier to find.
June 17, 2017
Marin Independent Journal