By KEVIN McCALLUM
THE PRESS DEMOCRAT
Santa Rosa’s pension task force kicked off its work Tuesday with a sobering revelation that the city’s pension obligation is underfunded by $100 million.
The figure, an estimate provided by interim Chief Financial Officer Bruce McConnell, underscores the scale of the financial challenge facing the city and the tall order before the task force as it grapples with ways to fix the system.
“We’re not going to solve the problem in six meetings,” chairman Scott Bartley said.
That’s how many times the task force is scheduled to meet before an April deadline to deliver a report aimed at helping the public and the City Council understand the problem and offer possible solutions to the soaring pension costs.
About 30 members of the public and at least eight city officials attended the meeting, which was moved at the last minute to a larger room to accommodate the crowd.
City Manager Kathy Millison outlined for the 11-member task force a brief history of the factors behind the state’s pension crisis and expressed her hope that the group will present policy makers with facts to inform their decisions.
“We want to air these views in as objective a fashion as we can,” Millison said.
But some critics continue to question whether the task force is properly carrying out its mission.
Councilman Gary Wysocky, who attended the meeting, questioned why a committee ostensibly formed for the purpose of educating the public is holding its meetings at 7:30 a.m. and not televising them.
At the City Council meeting later that evening, Wysocky raised his concerns. Bartley said the early time was chosen in part because many people on the task force have jobs to get to afterward, and Olivares said the strong turnout from the public showed the meetings were open and accessible.
Wysocky, who said he wanted to be on the task force but was not selected by Mayor Ernesto Olivares, said after the meeting that he worries rising pension costs might require the city to tap funds from the recently approved sales tax increase.
“I’m concerned that the structural deficit has not been addressed and that money will not be used for its stated purpose,” Wysocky said.
Voters passed Measure P in November to raise $6 million a year for eight years to fund city services, including police and fire protection, gang prevention, pedestrian safety, street paving and pothole repair and recreation and youth programs.
Bartley said the city could face a “backlash” from voters if Measure P funds are used for the retirement costs.
“I would hate to think we’re going to collect all that money and it’s not going to keep the parks green and all those things the voters wanted,” Bartley said.
Millison said the current challenges are rooted in decisions made in the late 1990s, when the California Public Employee Retirement System (CalPERS) was enjoying such strong returns on investments that many cities were “superfunded.”
This meant the assets in pension funds had swelled to such high levels that the cities didn’t have to contribute annually to CalPERS. Employee unions subsequently said they should “share in that wealth a little bit” and negotiated “improved and enhanced retirement programs,” Millison said.
The economy experienced strong growth through the mid-2000s, but it didn’t last.
“We all know now that things were not at all as rosy as they appeared to be,” she said.
The market crashed, retirement system investment pools shrunk and the city has faced exploding pension costs since, Millison said.
One key portion of the city’s retirement costs are expected to increase by $3 million next year, raising the total to $20 million.
Representatives of city employee unions, five of whom are on the task force, urged the task force to educate the public about the increases that workers have given up over the years to “buy” the increased retirement benefits.
Jack Thomas, president of the firefighters union, urged the task force to look further back than 1999 to get a clear picture of the history of pension obligations.
Paul Carroll, a representative of SEIU, lambasted The Press Democrat for publishing “hyperbole” about public pensions, citing an article from the Economist that he said was “irresponsible” for the paper to publish. The article was published in the editorial pages.
Carroll said he’s never represented a worker who received a pension of more than $100,000. Public pensions have “allowed people to stay in the communities where they’ve worked and continue to participate” and “kept them eating regular food,” Carroll said.
“It’s all about trying to ensure a quality of life in retirement,” he said
McConnell said the $100 million “underfunded” figure is the total amount of additional money the city will need, unless something changes, to fund the retirements of current and retired workers. The amount is substantial but is spread out over decades, he said.
And given that there are signs of improvement in the economy in general and the stock market in particular, there is reason to be hopeful some portion of that liability will “melt away” if investment returns improve.
But in the short term, the increasing costs to the city are a huge challenge.
“It’s not sustainable, so something has to change,” he said.