As revenues continue to stagnate, city of Lodi employee costs like pensions, health care and workers’ compensation continue to increase steeply.
The city currently spends $7 million on pension costs, and by 2013 to 2014, that amount is estimated to be at $10 million.
In the 2011 to 2012 budget alone, Lodi’s pensions costs are expected to go up by $1.2 million. During the same time period, medical costs are expected to increase by $783,160 and workers’ compensation will increase by $2.5 million.
At the same time, the city has drastically reduced its number of employees.
Through layoffs and enticing another 16 employees to retire early, the city reduced its staff to 1996 levels with 398 full-time employees. The city expects another 14 more employees to retire before July 1. At its peak in 2003 to 2004, the city had 480 full-time employees.
City Manager Rad Bartlam presented these numbers at his Budget Strategy Group meeting Tuesday night. He created the series of meetings to educate the public about Lodi’s budget troubles.
“This is not a one year issue. Next year, other than workers’ comp hopefully, we know health care and (California Public Employees’ Retirement System) costs will continue going up if left unchecked,” he said.
The information on increased costs comes as the city enters negotiation with union groups to ask for more concessions to make up the difference.
In the past two years, all of the city’s employee groups have agreed to some variety of concessions, including furloughs, pay cuts or elimination of city contributions to a retirement plan.
Bartlam recently announced that the executive managers and employees appointed by the council, including the city manager, city attorney and city clerk, agreed to more concessions for the upcoming fiscal year.
The employees agreed to accept a cap on the city’s contribution to their medical insurance premiums.
The group also agreed to pay 3.3 percent of their own pension costs. Currently, the city pays the employer and employee share of pension costs, which is common throughout the state but changing, Bartlam said.
During the past couple of years, costs for police and fire have gradually taken up a higher percentage of the city’s budget.
In 2005, public safety costs were 59 percent of General Fund personnel expenses at $13.1 million. This year, the number increased to $25 million, which is 75 percent of the General Fund.
Below is a breakdown of the costs for city employees:
Pensions: In the city of Lodi, police and fire employees can receive 3 percent of their average three highest years of pay at the age of 50. Miscellaneous employees will receive 2 percent at 55.
Bartlam gave this example: If a police officer has worked for the city for 30 years and reaches age 50, then the pension is calculated by multiplying 30 by .03 percent. So the retiree will receive 90 percent of their three highest years of pay.
Public safety is capped at 90 percent while miscellaneous is not capped.
The city adopted the retirement formula in 2000, and cannot decrease the percentages for current employees.
But the city is looking at going to a two-tier system where new hires receive a lower percentage. Tracy and Manteca both have two-tier systems for police and fire.
Lodi also has the option of having current staff pay a portion of the employee costs. State law allows public safety employees to pay up to 9 percent of their yearly pension contributions, while miscellaneous employees can pay 7 percent.
Part of the reason for the increase is that the PERS system lost 30 percent of its total fund value due to the down economy, Bartlam said. Cities, counties and other local agencies will have to gradually pay back those costs over the next 15 years, he said.
Health care: The city’s HMO premiums for family coverage have increased 153 percent in eight years.
Premiums went from about $650 in 2003 to almost $1,800 in 2011 for a family HMO. An employee with that type of plan pays $104 a month for their health care costs.
The city has at least 30 different health plans depending on how many family members are included on the plan and where the employee lives.
Workers compensation: Workers compensation is increasingly making up a larger share of the budget, increasing from $5.3 million in 2007 to 2008 to $8.7 million this past year.
The number of claims filed during that time has remained flat, but the number of days off has dramatically increased by more than 860 days during that time period.
The city is self-insured for workers’ comp, but cannot afford to keep having it jump $2 to $3 million every year, Bartlam said.
The increase in workers’ comp claims are troubling because the city has some control over them through education and training, as opposed to pension or health care costs, Bartlam said.
During the next year, Lodi will educate employees about the effects of workers’ comp claims on the city.
“There are certainly some of these claims that I would view to be questionable. The educational piece is you are just hurting yourself. If you are looking for just days off, you are not helping yourself, and you are hurting your co-workers,” he said.
The city will also look for training opportunities to reduce on-the-job injuries. For example, if back strain in the fire department is a common problem, Bartlam said the city will look at additional training on how to lift a hose or a body on medical calls.
The city is also looking into attaching the workers’ comp costs to the department where they originate.