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Pensions have Lodi officials concerned

City Council has taken steps to reduce costs, but city is still facing a huge bill

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Posted: Wednesday, September 18, 2013 12:00 am

Several Lodi City Council members are worried about the skyrocketing costs of employee pensions, which are projected to reach $16.9 million annually by 2020.

“We have no idea — no idea — where we’re going to get that money,” said City Councilman Bob Johnson. “That really scares me.”

Council members were briefed recently on the state of the city’s pension plans. The data given to lawmakers showed that the annual cost for the city’s share of employee pensions has risen by nearly $6 million since fiscal year 1999-2000.

That year, the city of Lodi paid roughly $1.54 million for its share of retirement benefits.

This year, city officials estimate the cost to be $7.1 million — that’s nearly 17 percent of Lodi’s $42.1 million general fund budget.

During the same period, the city’s employee pensions provided through the California Public Employees Retirement System have gone from being “superfunded” — having more money in the pension funds than necessary to pay beneficiaries — to having unfunded liabilities. Pensions for “miscellaneous” employees are funded at 84.3 percent for the current fiscal year, and police and firefighter pensions are funded at 73.6 percent. Most fiscal agencies consider 80 percent or higher to be a healthy funding level for public pensions.

Councilwoman JoAnne Mounce laid the blame on a state policies that have created a pension system that is “not sustainable,” such as giving public safety employees a 3 percent funding formula at age 50 instead of the standard 2 percent at 55.

Mounce, who also sits on the board of the California League of Cities, said pensions are a problem that most of California’s cities face.

Because of state law and court rulings, cities can’t take away or reduce pension benefits for current employees.

But they do have options.

Mounce said the city has done what it can at this point, such as requiring employees to share the costs of their pensions.

To cut pension costs for the city, lawmakers worked out a deal in 2011 in which employees will pay part of the cost for their retirement plans. As of Jan. 1, 2014, all of the city’s employees except members of the International Brotherhood of Electrical Workers will pay the maximum employee share of pension costs allowed by the state — 7 percent for “miscellaneous” employees and 9 percent for police and firefighters.

“Until the State of California makes changes to the pension system, there’s nothing (else) we can do,” Mounce said.

Representatives of the city’s public employee unions could not be reached for comment.

The city can also cut staff and programs as pension costs take up a larger share of the budget pie.

But Councilman Larry Hansen — the city’s former police chief — said that because of the recent recession and another fiscal crisis in 2002 the city has cut about all that it can, including more than 100 staff positions.

“We have fewer police officers than when I left in 2000,” Hansen said.

Mounce said she is not willing to cut any more from departments and agencies in order to foot the pension bill.

Mayor Alan Nakanishi said that although he is worried, the city is in a relatively stable financial position and should “weather the pension storm” better than a lot of other municipalities. He noted that the city budget is balanced and its reserve fund sits at 16 percent of the budget.

He and other council members said they are keeping up with the issue through regular briefings on pensions, and they are working to stay on top of the problem.

“It’s a big issue we’re going to have to deal with,” Nakanishi said. “Right now, the financial picture of Lodi is very good compared to other cities. We’re not going into bankruptcy — we have reserves.”

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