[San Mateo County] Cost of pensions climb even as Redwood City boosts payments

City manager says it’s a growing gap, ‘we need to fix’

Blog note: this article references a grand jury report.

Extra payments toward pension costs haven’t cut Redwood City pension liability — which has increased because of actions by the California Public Employees’ Retirement System, the city manager says.

Changes by the state to pension forecasts based on mortality, retirement rates and inflation — as well as more conservative investments by the state — led to the municipality’s $242 million pension liability, said City Manager Melissa Stevenson Diaz.

Diaz, who spoke during a mid-year budget report Monday to the City Council, said that pensions and health care costs for retired employees total more than $300 million — a gap she said “We need to fix.”

Amy Morgan, spokeswoman for the public employees retirement system, said CalPERS recognizes the impact that increased pension costs have on employer partners.

Most agencies are expected to see employer contribution increases for a few years and then see a slow and steady decline until around 2024, Morgan said.

Jack Dean, editor of the website PensionTsunami that tracks California’s public employee pension crisis, said the increased liability for Redwood City even as the municipality makes extra payments toward pension costs is not unique in the state.

“It’s happening everywhere,” Dean said. “It’s widespread.”

A day of reckoning will arrive for California and its pension costs, he said.

“It may not be in my lifetime,” added Dean, 72.

Cities and school districts in the state put tax and bond measures before voters that Dean said are pension taxes to cover such costs.

Joe Nation, a professor of public policy at Stanford and project director for Pension Tracker, said people assume local government pensions are guaranteed.

If I were a public employee working for a city or county in California and banking on retirement checks at age 55 or 60, Nation recounted, “I’d be a little bit nervous.”

Municipal and county government can reduce pension, he said.

Members of the Redwood City Council at their meeting Monday supported city staff recommendations that include paying $3 million to reduce pension liability, $1.5 million to support residents’ transition from homelessness or vehicle dwelling into permanent housing and spending $1 million toward climate adaptation initiatives.

A June 22 hearing is scheduled for the city budget.

The San Mateo County Civil Grand Jury, in a 2018-19 report, commended Redwood City and seven other municipalities for additional pension contributions to CalPERS beyond yearly requirements.

February 29, 2020

The Daily Journal

By Ryan McCarthy