City Piddles away
MILLIONS in Savings
PLUS: Bungle in the Jungle
Part 1 by Marc Garman with part 2 by Robert Schussel, Ph.D
In a special meeting Tuesday of the Vallejo City Council, the matter of amending the current CalPERS (California Public Employee Retirement System) agreement for future hires in the Vallejo Fire Department will be addressed. The intent is to change the retiree formula from 3%@50, which allows for a 90% retirement after 30 years to 2%@50 which will significantly reduce the payout to 60% after 30 years slightly slowing the rapid growth of the unfunded pension liability facing Vallejo, which now stands somewhere north of $250,000,000.
If this sounds vaguely familiar it should because we went though this once before. In a significant gesture, the Vallejo Fire Department, and IAFF Union agreed to modify pension benefits for future hires to the 2%@50 level.
Unfortunately, The City completely and totally blew it. They screwed up...dropped the baby...etc.
In an unfortunate string of events involving the Human Resources Department, city negotiators and other parties un-named, there was a confusion over the classification of the new Fire Department hires. An opinion was put forward that the new hires were in the same employee class as the Police Department (?!) and that their new contract provision could not be implemented until discussions with Vallejo's Police had completed. We know that got pushed off until 2013. Meanwhile, the window of opportunity to implement the retirement formula revision closed.
All twelve of Vallejo's new Fire Department hires are now in line to receive retirements we cannot afford. Even Governor Jerry Brown realizes that the unfunded employee pension liability in California is unsustainable as illustrated by the legislation he recently pushed through in California reducing retiree benefits. Not that anyone doesn't want city employees to have great retirements...it's just that insolvency and systemic collapse really suck.
Fire employees, to their credit came forward willingly to help The City by allowing retirements for future hires to be reduced. Both current employees and the new firefighters also agreed to pay 4% more into CalPers across the board and will be doing so, however it is hardly enough to reverse this latest multi-million dollar screw up.
Apparently, neither Fire Chief Paige Meyer or past IAFF 1186 President Kyle Long knew about this kerfuffle until recently. They assumed that the contract agreements would be implemented properly as did members of the City Council. Granted, CALPers regulations have a reputation for being dauntingly complex, and a number of heads have felt the sharp blade of City Manager Dan Keen's GUILLOTINE recently, but none of this will get back the millions of taxpayer dollars pissed away. The unfunded pension liability is coming home to roost both in Vallejo and statewide. Screw ups like this don't help to say the least.
Hope we won't have to change our city slogan to: Vallejo. We liked Bankruptcy so much, we did it twice.
Below is a further analysis from Dr. Robert Schussel, Ph.D
Bungle in the Jungle
By Robert Schussel, Ph.D
The purpose of this report is to determine whether a savings had occurred when the City hired 12 additional fire fighters over the past 12 months
Using Grants and Measure B funds the City has been able to hire 12 additional fire fighters. At the time City Council voted to hire 12 fire fighters, City Council Members were told it would be under the second tier of the pension system. Employees in the second tier would have to wait longer to retiree and that the amount of credit that they received for each year of service would be less .
Below is an excerpt from the agreement that IAFF 1186 (Firefighters Union) signed with the City.
Effective as soon as practicable ,the City of Vallejo shall amend its contract with PERS in order to provide Section 21362- retirement formula for all employees hired thereafter in all applicable classifications within the Vallejo Fire Department.
However the City's Human Resources site Summary of Benefits for Firefighters states that[ all] Fire Fighters would receive a Pension of 3%@50.
In response to a VIB Public Records Act inquiry about the discrepancy between the IAFF MOU (Memo of Understanding) and the HR site, Mary Neilan (Interim HR Director) wrote the following:
"The city has not amended its contract with PERS to provide a second tier of retirement benefits (2% @ 50) for new firefighters. I have not found any documents or correspondence with CalPERS that respond to your question as to why the contract provision has not yet been implemented".
To date no answer has been received regarding who in the City was responsible for making sure Section 21362-2%@50 was implemented with CalPERS (California Public Employee Retirement System) .
While exact figures are not known I estimate that it is costing the City an extra $15K to $20K per Fire Fighter for the 3%@50 pension plan (as compared to the 2%@50) or about $240K in total per year.
What occurred with the hiring of the 12 new Firefighters is criminal.
The Firefighter Union (IAFF1186) agreed to the second tier of pension ( 2%@50) and City Council voted to hire these 12 individuals on the condition that they would be hired at the second pension tier of 2%@50.
The failure of a Staff person(s) to do their job will cost an extra $240,000 ( plus additional rate increases) per year for the next 20 to 30 years. The worst part is no one is being held accountable.
It appears that even City Council Members were kept in the dark about this.
An explanation of what happened needs to occur. But if past practices are any guide, no response will be forthcoming.