Today's Council meeting was mostly in closed session with representatives of the four labor unions. There was however a public comment session prior to the closed session. I was the only one there (aside from the City Council/employees) and I don't believe it was broadcast, so I thought you might like to know what I think our Council needs to do about pensions. Here is what I said (please notice my final sentence):
"I am here to again urge you to adopt a revised pension plan for new-hires. As you well know, union sponsored legislation precludes us from reducing pension arrangements for anyone already hired - even for years not yet served. I can't help but note that it is perfectly OK to make pension plans more generous for those already hired - and even to do so retroactively. That is exactly what you did in 2001 and again in 2003. None-the-less, the Unions now act as if 3% annual multipliers are a long-standing, god-given right. Our very one-sided laws make it imperative that you take action to reduce pensions for new-hires now. Savings to taxpayers from less generous pension plans start small but increase to very significant amounts - in the millions I expect - by the time they are fully implemented.
I favor providing a reasonable pension for our employees - a pension somewhere in the ballpark of the pensions that those who pay the taxes can expect to receive. In my judgment a reasonable pension is about 75% of salary -- that is a number recommended by many financial planners as about what is needed to maintain a pre-retirement standard of living. Importantly, that pension should be earned by working for a full career. I think 40 years is a minimum "full career" in these days of ever-longer life spans. Certainly one who works only 25 or 30 years with our city should not expect taxpayers to provide all of their pensions.
Right now non-safety workers can retire at 60 years of age and receive 3% of final years salary for each year worked. In addition, taxpayers pay Social Security for them. Non-safety workers stand to receive far more than 75% of salary - and at a significantly younger age than Social Security recipients. What do they do that qualifies them for a pension so much more generous than the taxpayers who foot the bill can expect to receive?
I recommend changing to a defined contribution plan with the City paying 10 - 12% of salary (including taxpayer Social Security contributions). Our employees can manage that money, take it with them when they leave, and add to it if they want a more lavish retirement. Most important, future generations aren't stuck paying the bills that we ring up.
If you, or the employees union, are not willing to shift to a defined contribution plan, I next recommend that you shift to the CalPers option of a 1.5% multiplier effective at 65 years of age. Sixty-Five is two years sooner than full Social Security payments start. A 1.5% multiplier with 40 years of work gives a pension of 60% of salary at age 65. Add to that another 20 - 40% of salary from Social Security, depending on when one decides to begin drawing it. A guaranteed pension of 80% to 100% of salary sounds mighty fair to me. If you don't agree, I certainly wish you would explain why."