by Michael McDaniel
Now is the time to focus on solutions to our public employee pension plan crisis. As The Union has highlighted in months past, our local government agencies are burdened with insane amounts of debt associated with our public employee pension programs. Years of mismanagement by our local and state elected officials, overpowering employee unions, mismanagement by CalPERS, and poor investment markets have left us to battle this emergency. With inaction the debt will continue to balloon.
It is estimated that The County of Nevada’s Miscellaneous Employee pension plan [which does not include public safety employees] is under funded by $87,866,218. To put this amount into prospective, the total expected operating budget for Nevada County for 2009/2010 totals approximately $185,000,000 and total tax revenues are expected to be shy of $43,000,000 in 2009/2010. I estimate that the pension plan promises total $248,063,046, while the actual amount available to fulfill such promises at approximately $160,196,828. Which means the pension fund for Nevada County “Miscellaneous Employees” is only 64.6% funded (or 35.4% underfunded-the goal is to be 100% funded). On our current course, our debt will only continue to grow.
We owe it to our current and past public employees to fix this problem in a manner which also respects us taxpayers. We should not look to bankruptcy or hyperinflation as remedies for this mess. Without action, this predicament will play out in one of two ways (if not a combination of the two): taxes will soar and/or public employee pension benefits will fall short of the promised benefit. Again, without action, taxes will dramatically increase and/or public employee benefits will be “renegotiated” (read lowered). This is our best case destiny if no action is taken.
Current employees, supervisors and taxpayers are on the same team. This “sinking ship” does not allow the luxury of finger pointing or name calling- we are all in the same boat. Now is the time to isolate and solve this crisis: together.
Some possible solutions include:
Updating retirement packages for new hires to a 401k style program
Increase the probation periods before new employees become eligible
Raising retirement age for new hires
Using a lower assumed rate of return (currently a net after expense of 7.75% annually is assumed- have you averaged such a return the last few years?)
Offer hybrid pension plans that combine elements of both defined benefit and defined contribution plans.
Not filling “open” positions
Privatizing typical agency tasks
Decreasing the cost of living adjustment to existing plans
Most of the aforementioned solutions require action by our State and Federal lawmakers. Current California state laws and regulations prevent local elected officials from taking action. It is imperative that our state legislators provide changes to current rules and regulations before our local government agencies can make serious attempts at solving this crisis. I urge you to contact your state legislators and local elected officials and request that they lead this fight.
I hope to write follow-up letters to update you on the progress we are making in this fight.
This catastrophe is staring us ALL in the face (note: The City of Grass Valley has the same dragon to slay). We need material changes, now, to solve this crisis.
Michael McDaniel is a 6th generation Nevada County native and Executive Director of Sierra Environmental Studies Foundation (SESF).s
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