Blog note: This report is an example of a jury following up on an earlier report, something we recommend to juries in our training program.
VACAVILLE
— Vacaville needs to overhaul its pension liability model and establish an
“annual contribution schedule to retire the unfunded liabilities over a 10- to
15-year period.”
That
was among six recommendations attached to five findings by the 2020-21 Solano
County civil grand jury, which revisited the issue of Vacaville’s troubled
unfunded pension liability issue after a critical report two years earlier.
A
2018-19 civil grand jury concluded that the city’s benefit package “indicates a
benefit cost that is not sustainable” and that “failure to address this problem
could result in loss of employees and corresponding loss of services to
citizens.”
“The
city of Vacaville’s current employment benefits packages are unsustainable and
offer benefits exceeding those provided by other California cities with similar
population and home values,” one of the findings by the 2020-21 civil grand
jury states.
The
latest report also indicates that “while the City Council has taken steps to
reduce the amount of unfunded liabilities, additional actions are required to
maintain city services and fully fund future employee benefit obligations.“
The
city has two pension plans through the California Public Employees’ Retirement
System: an account for employees involved in public safety such as police and
fire; and a miscellaneous account for the majority of remaining employees.
It
also has an Other Post-Employment Benefits program, or OPEB. In this case, it
is a lifetime health care benefit to current and retired employees, their
spouses, and children up to the age of 26.
“The
cost of CalPERS’ Family Premium health care rates rose an average of 8.5% per
year from 1975 to 2020, with the current premium at $2,115 per month. The city
has three employee benefit tiers and contributes up to 85% toward all active
employees’ health care premiums and toward retiree health care premiums based
on which tier they retire from,” the 2020-21 grand jury report states.
“Each
tier is predicated on the date of hire and years of service,” the report adds.
As
of June 30, 2019, according to the city’s Comprehensive Annual Financial
Report, as cited by the grand jury, the combined unfunded pension and health
care liabilities exceed $228 million.
That
represents a $122.11 million unfunded liability in the public safety account
and $87.75 million in the miscellaneous account. The OPEB liability is more
than $80 million, the report states.
The
total for all three, given those figures, is closer to $288.86 million.
Vacaville
Mayor Ron Rowlett was not available for an interview due to a family matter. A
call to the city manager’s office was not returned.
The
city’s full liability amount is categorized as “high risk by the California
State Auditor,” the grand jury reports.
The
grand jury recommends, that the city “establish an annual contribution schedule
to retire the unfunded liabilities over a 10- to 15-year period.”
It
also recommends that the city “apply for American Rescue Plan Act funds to make
additional contributions toward reducing pension and OPEB liabilities.”
The
problem with the second of those recommendations is that the $12.67 million the
city is expected to receive directly from the American Rescue Plan Act cannot
be used to reduce unfunded pension liabilities, according to the Secretary of
the Treasury guidelines.
“No
recipient may use this funding to make a deposit to a pension fund,” according
to a response from the Department of the Treasury to questions by the Daily
Republic. “Treasury’s Interim Final Rule defines a ‘deposit’ as an
extraordinary contribution to a pension fund for the purpose of reducing an
accrued, unfunded liability.”
Whether
or not funds can be used for the unfunded OPEB liability is more of a gray
area, since health care retirement packages may be viewed differently than
pension liabilities. The Department of Treasury was looking into the matter,
its email response stated.
Moreover,
those Rescue Plan funds are distributed directly to local jurisdictions, and
uses of funds that might be available through an application are similarly
restricted.
The
civil grand jury also recommends “the city use an independent facilitator to
negotiate all labor contracts” and that “all labor negotiations should address
unfunded pension and (Other Post-Employment Benefits) liabilities.”
The
grand jury further recommends that for Tier 1 and Tier 2 employees, the city
“convert to a defined contribution health care benefits model.”
The
city should re-establish the OPEB advisory committee “and act on the recommendations
made by the prior committee,” the civil grand jury recommends. The report
suggests the City Council simply dismissed the recommendations made by that
committee.
Finally,
the civil grand jury recommends the council “take actions to ensure that issues
affecting pensions and OPEB liabilities continue to be reviewed regularly and
publicly.”
If
the city has made a formal response to the grand jury, as of Friday that
response had not yet been posted on the Solano County Superior Court website.
Solano
County Daily Republic
By Todd R. Hansen
June 12, 2021
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