• Skip to primary navigation
  • Skip to main content
  • Skip to primary sidebar
  • Skip to footer

The Valley Citizen

Pursuing truth toward justice

The Valley Citizen

Pursuing truth toward justice
  • Arts
  • Education
  • Environment
  • History
  • Nature
  • Politics
  • Wit
  • About

Inside The Modesto City Council: City Employees and CalPERS, by Bruce Frohman

January 24, 2013 By Eric Caine Leave a Comment

pension fundNews item from the Modesto Bee: Cost for the City of Modesto to leave CalPERS: $1 Billion plus. 

A Rosy Prediction of Early Last Decade

In the early 2000’s, the Modesto City Council reviewed an analysis of the fiscal integrity of the California Public Employees’ Retirement System, otherwise known as CalPERS. The presentation was made in the context of proposals to lower the retirement age of public employees and/or raise future benefits.

The analysis revealed that CalPERS was flush with cash and would always have plenty of money to pay benefits. The picture was so rosy that it appeared that public employee benefits could be increased without ever increasing the cost to taxpayers.

The net effect of the presentation on the Modesto City Council at the time was to allay any concerns about CalPERS ever having financial problems or that the city would ever have to pony up extra funds to bail out the system. In its wisdom at the time, the Council did NOT opt to reduce the retirement age or up the benefits package of its classified employees. The Council felt that the city’s existing retirement package was competitive and fair. Raising the benefit was considered unfair to the taxpayers.

In 2008, the stock market crash revealed that CalPERS was vulnerable to adverse investment conditions. Suddenly, the retirement program’s funding weaknesses became apparent.

Given the rosy outlook presented before the crash, imagine the shock the City Council of 10 years ago would experience if it had known that by 2013, the City Council would explore the cost of leaving the CalPERS system!

Based on Modesto’s experience with CalPERS, one wonders how many other communities used the early 2000’s rosy information from CalPERS to increase taxpayer costs for employee pensions. It’s easy to see how the increased pension liability combined with shrinking tax revenue created catastrophic budget situations throughout the state.

Hindsight is always 100 percent correct. But along the way, simple decisions based on faulty assumptions can result in catastrophic results years later.

Modesto Has Choices Regarding Its Commitment to CalPERS

In 2013, Modesto could choose to leave CalPERS–if it were willing to pony up over a billion dollars. This clearly won’t happen.

In order to reduce costs, Modesto can either reduce the CalPERS pension package for new hires or put new hires entirely into the Social Security program. Another option would be to offer Social Security and have a CalPERS component that is smaller than the current commitment.

For current employees, the Modesto City Council can make changes, but would be wise to do so by including the input of affected employees who would have to live with a revised system.

A Draconian Proposal

The Modesto City Council is considering a proposal to cut the city’s contribution to CalPERS and require employees to pay entirely for their own pension program. Such a draconian policy is rare in the public and private sectors. For example, under Social Security Law, employers as well as employees pay taxes to help fund the program. If the City Council required employees to fund all of their CalPERS contributions, city employees would have the worst deal in the entire country. The law requires that all employees either contribute to Social Security or participate in a comparable pension plan. Only public employers who previously opted out of Social Security have the choice to stay out of Social Security.

Making employees pay the entire cost of their pension plan would make future hiring very difficult and would cause a migration of current employees to other jobs elsewhere. During a recession, when jobs are scarce, employees can be preyed upon. In the long run, the community would suffer from the loss of employees with vital institutional experience.

Reducing the employer contribution CalPERS to save taxpayer money would have an effect similar to a pay cut. While such a proposal is not as draconian as paying nothing, the result would make Modesto less competitive in the labor market. Modesto city government has highly skilled employees whose worth should be accurately valued and compensated.

Filed Under: Featured, Politics Tagged With: Modesto city employees CalPERs, Modesto city employees pension

Reader Interactions

Leave a Reply Cancel reply

Your email address will not be published. Required fields are marked *

Note: Some comments may be held for moderation.

Primary Sidebar

Off The Wire

?This is where society fails to have an answer?: Poll reveals Bay Area residents? frustration with street homelessness
“This is where society fails to have an answer”: Poll reveals Bay Area residents? frustration with street homelessness
Data includes support for possible measures, including a court system with the power to order people into mental health treatment.
www.mercurynews.com
?Monster Fracks? Are Getting Far Bigger. And Far Thirstier.
“Monster Fracks” Are Getting Far Bigger. And Far Thirstier.
A Times analysis shows that increasingly complex oil and gas wells now require astonishing volumes of water to fracture the bedrock and release fossil fuels, threatening America’s fragile aquifers.
www.nytimes.com
Newsom urges SCOTUS to consider encampment ruling that has 'paralyzed' California cities
Newsom urges SCOTUS to consider encampment ruling that has ‘paralyzed’ California cities
The Democratic governor’s intervention lays down a mark in a legal dispute with potentially profound implications for one of California’s most pressing issues.
www.politico.com
Clarence Thomas Secretly Participated in Koch Network Donor Events
Clarence Thomas Secretly Participated in Koch Network Donor Events
Thomas has attended at least two Koch donor summits, putting him in the extraordinary position of having helped a political network that has brought multiple cases before the Supreme Court.
www.propublica.org
How hungry is California? Millions struggle to eat well in an abundant state
How hungry is California? Millions struggle to eat well in an abundant state
How bad is hunger in California? A lot depends on your access to food aid, which expanded during the COVID-19 pandemic but now is being reduced.
calmatters.org
Sacramento DA sues city over homeless encampments
Sacramento DA sues city over homeless encampments
Sacramento County had nearly 9,300 homeless people in 2022, based on data from the annual Point in Time count. That was up 67% from 2019. Roughly three-quarters of the county’s homeless population….
www.mercurynews.com
At Last, a Real Possibility to Avoid Catastrophic Climate Change
At Last, a Real Possibility to Avoid Catastrophic Climate Change
After decades of minimal action, Congress passed the largest and most comprehensive piece of climate legislation in U.S. history. Will we make the most of this opportunity?
www.audubon.org
How the fentanyl crisis' fourth wave has hit every corner of the US
How the fentanyl crisis’ fourth wave has hit every corner of the US
The epidemic’s staggering scale and infiltration of communities is laid bare in a new study.
www.bbc.com
Can licensed tent villages ease California's homelessness epidemic? This nonprofit thinks so
Can licensed tent villages ease California’s homelessness epidemic? This nonprofit thinks so
Taking people off the street and into tents is a new twist on homeless shelter being explored by the San Francisco-based Urban Alchemy in two tent villages operating in Los Angeles and Culver City.
www.latimes.com
Mississippi has problems, but it's handling homelessness better than L.A.
Mississippi has problems, but it’s handling homelessness better than L.A.
The public tends to blame homelessness on poverty, drug use, crime or even warm weather. But other cities don’t have L.A. levels of street homelessness because they have more available housing.
www.latimes.com
Neo-Nazis March Through Florida Park
Neo-Nazis March Through Florida Park
The demonstrators raised “Heil Hitler” salutes and waved flags with swastikas.
www.thedailybeast.com
Families have high hopes for Gavin Newsom's CARE Courts. Providers want to lower expectations
Families have high hopes for Gavin Newsom’s CARE Courts. Providers want to lower expectations
Gov. Gavin Newsom?s experiment to push Californians with mental illness off the streets and into treatment, CARE Court, starts soon.
calmatters.org

Find us on Facebook

pp
The Valley Citizen
PO Box 156
Downtown Bear Postal
1509 K Street
Modesto, CA 95354

Email us at:
thevalleycitizen@sbcglobal.net

Footer

The Valley Citizen
PO Box 156
Downtown Bear Postal
1509 K Street
Modesto, CA 95354

Email us at:
thevalleycitizen@sbcglobal.net

Subscribe for Free

* indicates required

Search

• Privacy Policy

Copyright © 2023 The Valley Citizen

Dedicated to the memory of John Michael Flint. Contact us at thevalleycitizen@sbcglobal.net

Editor and publisher: Eric Caine

Website customization and maintenance by Susan Henley Design