Other Voices: There’s no time to waste – we need solutions for public pensions now
September 4, 2009
Now is the time to focus on solutions for 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 Nevada County’s “miscellaneous employee” pension plan (which does not include public safety employees) is underfunded by $87,866,218.
To put this amount into prospective, the total expected operating budget for Nevada County for 2009-10 totals approximately $185 million and total tax revenues are expected to be shy of $43 million in 2009-10.
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 percent funded (or 35.4 percent underfunded – the goal is to be 100 percent 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 that 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.
Recommended Stories For You
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.
• Increasing 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 percent annually is assumed – have you averaged such a return the last few years?)
• Offering 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 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 sixth-generation Nevada County native and executive director of Sierra Environmental Studies Foundation.)
Trending In: Opinion
- Terry McAteer: Drain the swamp by eliminating U.S. Department of Education
- Darrell Berkheimer: Different approaches to solve dwelling shortages
- Our View: It’s time to take a Love Walk
- George Boardman: Are we ready to get serious about dealing with the threat of wildfire?
- R.L. Crabb: It takes a village idiot
- Authorities rule Roseville woman’s death a suicide
- Grass Valley man accused of threatening to kill, gut officers
- Snow, rain totals for Nevada County beating last year
- Grass Valley police say suspected burglar was found with counterfeit money
- Meet Your Merchant: Business started when owner found a niche during the Great Recession