Mailbag

We received this note in response to our post from a couple days ago regarding the Claremont Police Officers Association and their preparations for contract negotiations with the City (to be filed under "Prepping the Battlefield"):

DATE: Wed, February 16, 2011 1:26:41 PM
SUBJECT: "crime scenes"
TO: Claremont Buzz

Really smart post -- nice work connecting the dots, and a pleasure to see. I like Dieter Dammeier, and think highly of Claremont cops, and still thought you righteously nailed them to the wall on this one.

Yes, it's unfortunate that the CPD officers give residents the false choice of having to either support their contract demands or else fear for their collective safety. We don't doubt that our police work hard for their money, but let's face it, a Claremont officer doesn't face nearly the same daily challenges as, say, an officer working the LAPD's South Bureau. The CPOA needs to set aside its own selfish interests and start thinking about what sacrifices they can make rather than insisting that everyone else - their fellow non-safety employees, people who count on services provided by the City, and cash-strapped taxpayers - pay for the CPOA's every demand.

Driven by an Inland Empire unemployment rate of 13.9%, public sentiment is lurching away from support for the CPD officers refusal to pay their share of their CalPERS pension plans. Witness the Daily Bulletin's editorial on just this subject. The Bulletin noted that Claremont's Ad Hoc Committee on Economic Sustainability came to the conclusion that the status quo for the City's budget is no longer viable.

That committee report, which was released last week, recommended a 1.5% hike in the City's Utility Users Tax, from the present 5.5% to 7%. The report also called for all city employees, including police officers, to start picking up their share of the costs of their pensions. The Bulletin agreed that the employees need to pay their fair pension shares, but they disagreed with the committee's proposal to increase the utility tax:

We admire the committee's thoroughness, looking at all sorts of possible tax and fee hikes before settling on the utility users tax as the most feasible and effective. But we do not favor raising the tax in this economic climate, nor did the three council candidates we have endorsed - Sam Pedroza, Opanyi Nasiali and Jay Pocock. We doubt that voters would approve the hike.

Nasiali, one of nine members of the economic sustainability committee, was the only one to oppose any utility tax hike. He was one of two who wanted employees to pay their own share of pension costs as quickly as possible, rather than phasing the change in over four years as the majority favored. (The employee share for public safety employees is 9percent of salary, for other employees 8percent.)

Requiring employees to pay their share ASAP - or perhaps, to reduce the discomfort somewhat by requiring them to pay 4percent in 2012-13 and the full amount from the next year on - is a reasonable course of action. (Glendora has imposed such a change on its employees; Claremont sanitation workers have already agreed to pay their own full amount.)

Government agencies started picking up employees' share of pension obligations as well as paying their own employer share when times were good - but times are no longer good and, besides, such largesse never was sustainable in the long term. Better for employees to pay that share than for mounting pension costs to require more and more layoffs and reductions in service over the years.

There are two items worth noting here. First, according to the Bulletin, incumbent Sam Pedroza is opposed to a utility tax hike. So it seems unfair and hypocritical to us that Pedroza supporters, some of whom are working behind the scenes to elect a slate consisting of Pedroza, Robin Haulman, and Joseph Lyons, are lambasting Nasiali and Pocock for being similarly opposed to raising the utility tax. Second, the same Pedroza-Haulman-Lyons supporters are spreading false rumors that Nasiali wants take away employee pensions. As the Bulletin piece stated, Nasiali is simply advocating that employees pick up the eight- or nine-percent that they are supposed to be paying in the first place. And, by the way, the city would continue to pick up its share of the employee pension payments.

So any talk of a wholesale elimination of the pensions is a lie, and we urge readers to get the name of any campaign volunteer who makes such statements, along with the name of the candidate they're working for. Better yet, ask for them to commit such statements to paper or to a recording, and forward those to us for a future post.

With election day only a few weeks away, the gloves are coming off those Claremont 400 fists, and it's up to the rest of us to hold them accountable for their silly games.

Pension Tension

To follow on Friday's post about Bell, CalPERS, and Glenn Southard, we came across a New York Times article by Ron Lieber titled "The Coming Class War Over Public Pensions." (The NYT has toned the title down to "Battle Looms Over Huge Costs of Public Pensions.")

Lieber writes that our labor force is evolving into a two-class system. On the one hand are public employees, who continue to receive generous, taxpayer-funded defined benefit pensions with built-in cost of living increases. On the other are private sector employees, most of whom do not have pensions but who may, if they work at the right place and happen to be savers, have 401(k) or IRA accounts in which they, not taxpayers, bear all of the risk.

According to Lieber, taxpayers will likely be asked to rescue underfunded public pension plans for cities and states when those begin to go underwater. As Claremont city council member Peter Yao said a couple weeks ago, our own employee' CalPERS pension account is underfunded to the tune of up to $50 million, something that the majority of the council (Elderkin, Pedroza, and Schroeder) and the Claremont 400, refuse to admit.

Claremont's pension problems are just one small part of a national problem. How much money are we talking about? Lieber tells us:

At stake is at least $1 trillion. That’s trillion, with a “t,” as in titanic and terrifying.

The figure comes from a study by the Pew Center on the States that came out in February. Pew estimated a $1 trillion gap as of fiscal 2008 between what states had promised workers in the way of retiree pension, health care and other benefits and the money they currently had to pay for it all. And some economists say that Pew is too conservative and the problem is two or three times as large.

So a question of extraordinary financial, political, legal and moral complexity emerges, something that every one of us will be taking into town meetings and voting booths for years to come: Given how wrong past pension projections were, who should pay to fill the 13-figure financing gap?

As Yao could tell Lieber, here in Claremont we won't be having those public meetings until the City is at the verge of bankruptcy. The same is true with nearly every other municipality in the state and nation. As a result, the people Lieber calls "have-nots," private sector workers, will also be the ones asked to bear the burden of maintaining the lifestyles of our current public sector retirees, who for the most part refuse to give any concessions on their benefits.

Our public sector pension costs are compounded by the practice of pension spiking, in which public workers in their final year of employment manipulate the rules to drive up the value of their pensions. CalPERS offers a couple different ways of determining pension payments. Under many, such as in the city of Bell, the amount is determined by the employee's final year of compensation. If employees game the system by working a lot of overtime or by cashing out unused vacation time, their pensions can end up significantly higher than their final base salary.

Those spiked pensions cause additional problems for already underfunded CalPERS plans because the employees end up earning much more than can be covered by the money they and their employers actually paid into the system.

To no one's surprise, former Bell city manager Robert Rizzo has become the poster boy for outrageous public pensions. The Daily Bulletin ran an article Saturday by reporter Sandra Emerson, who explained that as a result of how CalPERS formulates pension payments, the city of Rancho Cucamonga, where Rizzo worked for about eight years, will be on the hook for about $125,000 of Rizzo's estimated $650,000 a year pension, assuming Rizzo survives his tarring and feathering long enough to collect.

As we said Friday, when former Claremont city manager Glenn Southard retired from Indio, his base salary was $300,000 a year. However, Southard also could have earned as much a $30,000 performance bonus, and he cashed out $162,000 in unused vacation and sick time. If Southard's pension is based simply on his final year of earnings, and if any bonus and accured vacation/sick time count towards that amount, he could end up with a pension well in excess of his salary.

Whatever pension Southard gets, because of CalPERS' crazy rules, Claremont will be on the hook for a considerable portion of his pension. Because Southard worked here for 17 years, Claremont will have to pay for those 17 years, but the payout will be based on his final year in Indio. For Claremont's share of his retirement, Glenn will qualify for 2.5% of whatever that final Indio figure was times 17 (each year that he worked here).

The California Foundation for Fiscal Responsibility (CFFR) has a website that takes public information from CalPERS and CalSTRS (the California State Teachers' Retirement System) and posts the names and annual pension payments for anyone getting more than $100,000 a year.

Southard isn't on there yet because the figures haven't been updated since his retirement earlier this year, but another familiar Claremont personality did have her information posted. Our own Bridget Healy, Southard's right-hand woman in Claremont and Indio, retired in 2008 .

CFFR puts Healy's CalPERS pension at $166,701.84, of which Claremont will pay around $100,000 for Healy's roughly 18 years in Claremont, based on her $220,000 final year's salary in Indio. Healy, who seems to be maneuvering for another run at a Claremont city council seat, never has explained how she would manage her conflict of interest when it comes to pension matters here. However, we're going to guess that Healy's the pull-the-ladder-up-after-me type and probably won't have any qualms when it comes to cutting future employee benefits.

Here from CFFR are the Indio retirees in the six-figure club, soon to be joined by our friend Glenn:


And, in case you were wondering about our fair city, here is our $100,000+ CalPERS club:


We also present the Claremont Unified School District's CalSTRS pension high rollers:



There will be others joining these lists. Former Claremont Human Services Director Dick Guthrie, for instance, isn't on Claremont's CalPERS list, though his pension has to be well over $100,000. Former Claremont Community Services Director Mark Harmon and former Community Facilities Manager Mark Hodnick, too will join the exorbitant pensions club.

We're also struck by the presence of a number of prominent Claremonters on these lists. Council member Larry Schroeder is represented on the city of Lakewood's CalPERS pension rolls. Also, two influential members of the Claremont League of Women Voters own hefty public pensions: Bridget Healy and Anita Hughes, the wife of the late former Claremont mayor and CUSD assistant superintendent Alexander Hughes.

Yet another person, LWV president and Claremont Police Commissioner Barbara Musselman, is a former San Bernardino County Human Resources Director and receives a large San Bernardino County Employees' Retirement Association pension (SBCERA doesn't make its individual pension payouts readily available for the public).

Claremont's unsustainable pension obligations are the number one long term threat to our city's financial security. Yet, no one in any position of power, with the exceptions of Council members Yao and Corey Calaycay, are willing to deal with that threat. Instead, groups like the local League of Women Voters, who remained preoccupied with rehabilitating former Claremont mayor Ellen Taylor's image and helping Healy get elected to the council, are content to allow the City fly into a fiscal abyss.

One would expect people like Musselman or Healy to express a little more empathy and gratitude toward the people who fund their wealthy lifestyles. Instead, we constantly see them pushing this or that costly toy - a trolley, say - that only adds to the burden borne by the working stiffs who have to pay for for Musselman's and Healy's retirements as well as their own.

Lost in all this is the unfairness of forcing the public, the majority of whom do not have the luxury of unearned, spiked pension benefits with automatic cost-of-living increases, to rescue these underfunded public pension systems when they become insolvent. If our local and state elected officials and their supporters continue on their present course, that class war that Ron Lieber wrote of will move very quickly from metaphor to reality.

Another Year Older and Deeper in Debt

Local governments around California let out a collective groan last week when Sacramento Superior Court Judge Lloyd Connelly issued a ruling that supported the state's right to take $2 billion in redevelopment funds from redevelopment agencies across the state over the next two fiscal years.

The state, as you know, needs the money to help balance its $18 billion budget deficit. It seems to us that we were in just about the same place this time last year. The plan is for the state to take $1.7 billion for 2009-10 and $350 million for 2010-11. The money, legislators say, is supposed to go to local schools, which have their own problem with the state withholding money.

The first $1.7 billion payment was due yesterday. Monday's Daily Bulletin had an article about the state's latest money shift. The article described the impact of the redevelopment money grab on Inland Empire cities. Claremont City Manager Jeff Parker told the Bulletin that at least one Claremont Redevelopment Agency job will be eliminated because of the money transfer:

The Claremont redevelopment agency takes in about $3.8 million in property taxes, but has to pass along $1.3 million to other local agencies or into its low-income housing fund. Of the remaining $2.5 million, half goes to pay for debt incurred for past projects.

That leaves $1.25 million, with the state next week taking $1.19 million.

"It basically takes everything from that one year," Claremont City Manger Jeff Parker said.

That means Claremont will lay off its only full-time employee focused solely on economic development.

Claremont's City Hall has resigned itself to coughing up that $1.19 million Parker alluded to. The City's website has this news blurb:

Claremont Will Pay State Redevelopment Funds (May 6, 2010)

On Tuesday, May 4, 2010, the City was notified of the decision in the CRA lawsuit against the State of California. Sacramento Superior Court Judge Lloyd Connelly upheld AB X4 26, the state budget bill passed in July 2009 as part of the 2009-10 state budget that requires redevelopment agencies statewide to transfer $2.05 billion in local redevelopment funds over the next two years.Anticipating this decision, the City of Claremont put aside $1.2 million and is prepared to make the payment by the May 10 deadline.

Advocates of smaller government should be happy. Because of Sacramento's financial ineptitude, along with the refusal of state legislators to come up with reality-based methods for balancing the state's budget, every level of California government will have to enact even more austerity measures in the coming year. Those cuts will likely include such things as releasing older prisoners to reduce the state's prison costs and even taking a look at reforming public pensions.

Anti-tax groups won't be pleased, though, with the revenue side of the budget equation. Along with more cuts in services, the state will have to find replacement income to help reduce its deficit. Californians will soon have a clear picture of the exact size of that deficit when Governor Schwarzenegger's May budget revision (the "budget revise") is released.

The state's deficit is almost certainly to increase when the May revise comes out. Last week, the LA Times reported that the state's tax revenues were down 30% year-over-year. That translates to $3 billion, so the hard times are likely to continue a while more.

Mailbag

California's elected officials have been so preoccupied with the current budget crisis that they haven't begun to grapple with the issue of public employee pensions, which pose perhaps the greatest long-term threat to state and local governments' pocketbooks.

Years of overly generous, unrealistic pension benefits will come home to roost one day soon, as one of our readers observed:

DATE: Tuesday, June 16, 2009 8:43 AM
SUBJECT: officially a WTF!?!?!?
TO:Claremont Buzz

"WE want to show the governor we're angry," he said. "The union is fed up, employees are fed up."

The SF Chronicle has a database that lets readers look up the 8,000 city employees who make six-figure salaries. 3 at 50 is bankrupting governments. The state's payroll grew last year, while the budget crisis emerged in pretty stark terms. Bridget Effing Healy has a six-figure pension, and Brian Desatnik and Lisa Prasse make...well, I can't even finish that sentence, 'cause it gives me an instant headache.

And so on. I appreciate the work of a lot of government employees. Cal Fire is a terrific agency, and a Highway Patrol officer saved my life once, at considerable risk to his own. But my GOD -- government employees are fed up? "Stop, uh, paying us higher salaries than comparable employees in the private sector! And quit imposing your generous pensions on us! Don't you see how angry we are?"

Ask them again in two years.

One Retiree not Living on Dogfood

Newly-elected Claremont City Councilmember Larry Schroeder (left) pulls down just under $114,000 yearly from the state pension system due to his career in city government. This information was released today by a pension watchdog group, California Foundation for Fiscal Responsibility. He easily made the cut of 4,818 government workers receiving more than $100,000 annually.

Altogether, these former employees draw at least a half billion dollars--probably much more--from the system.

We'd post Bridget Healy's pension, but apparently her December 2008 retirement was too recent to make the Freedom of Information Act disclosure to the CFFR. So make that 4,819 pensioners over the $100K mark.

You may search the database by clicking on this link and following the instructions. Try searching by employer and using "Claremont". Or, pick your favorite retiree by name. Here's a screengrab of the search for "Schroeder":

click to enlarge

Department of Corrections

Our April Fool! post was wrong in its entirety and we'd like to apologize to the community for messing this up. You may recall that we spun a fantastic tale about Bridget Healy, that ol' Carpetbagger, being nominated to the Claremont Chamber of Commerce Board of Directors, all done in the most light-hearted and whimsical way to give our readership a little April Fool cheer. We fabricated quotes. We made things up out of whole cloth. We went over the top

Well, it turns out that wasn't such a tall tale after all. Arrives now in the mail the April 2009 number of the Chamber newsletter, Business News, and right there on the front page is the notice of "Nominating Committees [sic] Recommendations for Board Members". Down towards the bottom of the first column is the following:

At the meeting in February the Board voted to increase its size to 20 members. The nominating committee suggested:

Ira Jackson, Drucker School of Business Management for a 3 year term expiring in 2012

Jeremy Cooper, Pay-Pro Services for a 2 year term expiring in 2011

Bridget Healy, Consultant for a 1 year term expiring in 2010

click to enlarge

We see that Bridget Healy has been listed as an "Associate Member" of the Chamber so her "consulting" business must be a new one. Guess she needs a little more than her $150K plus per year city pension to scrape by. (See this post, midway down, under "Doing the Pension Math")

Pay Now, Pay More Later

Look out, Claremont. Your city staff just may cost you a trip to the poorhouse. A reader wrote in to tell us that the city of Vallejo voted earlier this month to file for bankruptcy.

According to an Associated Press article about the bankruptcy:

VALLEJO — With hundreds of concerned residents looking on, the Vallejo City Council voted unanimously late Tuesday to file for bankruptcy, making the city the first of its size to seek protection due to unaffordable labor contracts.

The dramatic vote came despite a last-minute appeal by state Sen. Pat Wiggins, D-Santa Rosa, and an aide for Assemblywoman Noreen Evans for the city to avoid bankruptcy....

....Vallejo has been slammed by increasing costs of its public safety contracts, the housing crisis, lower property values and state raids on local coffers.

The city faces a $16 million deficit in the 2008-09 fiscal year which starts July 1. Tuesday night's dramatic vote came after months of fruitless talks between city and labor representatives.

After those talks, which continued through the weekend and failed to produce a long-range fiscal plan, Vallejo's top administrators recommended bankruptcy as the only option remaining.

Chapter 9 bankruptcy will allow the city to gain temporary protection from creditors and enable the city to continue to offer citizens necessary services.

Another AP story explained the reasons why employee costs are dragging down city budgets and talked about the downside to a municipal bankruptcy:

Like Vallejo, many U.S. cities are saddled with labor contracts that offer salaries, overtime pay, pensions and health benefits they say they can't afford. Those expenses are expected to balloon as health care costs soar and employees retire earlier and live longer.

Vallejo officials hope the bankruptcy judge will allow the city to rewrite its labor contracts and bring compensation down. If they're successful, other cities may follow their lead, experts say.

"The solution that will come out of Vallejo may very well be a model for other cities facing similarfiscal challenges," said Marcia Fritz, vice president of the California Foundation for Fiscal Responsibility. "If Vallejo turns out better after declaring bankruptcy ... that will be an avenue (other cities) look at to break contracts."

But bankruptcy is not without risks. It will cost the city millions of dollars in legal fees and damage its credit rating. As a result, borrowing money to build roads, schools and other projects will become much harder - and more expensive.

Claremont has some experience with ballooning employee costs. Before he left for Indio, former Claremont City Manager Glenn Southard got the Claremont City Council to raise city employee pension benefit to 2.5% at 55, meaning that once employees reach 50 years of age, they are qualify for a pension equal to 2.5% of their annual salary at retirement for every year of employment. So an employee who started working for Claremont at, say, 25, and who retired at 55, would qualify for a pension benefit of 75% of their salary - 30 years of service, times 2.5%.

Claremont police officers qualify for an even higher pension. CPD gives out 3% at 50.

To those of you working in private industry, do you receive such generous pension benefits? If you are a worker in one of the 87% of private businesses not offering a defined benefit pension, you're pretty much on your own to fund your own retirement through a 401(k) plan or an IRA. But public employees are in a different class from you.

Prior to the current pension benefit going into effect in July, 2004, Claremont's non-public safety pension benefit was 2% at 55. What Southard didn't tell you, what he didn't care about, was that the .5 % increase was retroactive back to each employee's date of hire. Consequently, Claremont's non-public safety pension account with the California Public Employee Retirement System (CalPERS) became instantly underfunded by as much as $10 million - a fact that Councilmember Peter Yao tried without much success to get Southard's staff to face.

Those of you who recall the meeting where Claremont's City Council voted on the pension increase may remember the unseemly spectacle of senior city employees lined up in the front row and cheering when the council approved the pension.

This all raises the a second problem - that of the blurring of the line between employee and friend. While it's great that the elected and appointed people who run the city love their staff, it's terribly irresponsible for them to abandon their duties to safeguard the public coffers by allowing themselves to become too close to their employees.

Claremont Human Services Deputy Director Mercedes Santoro, for instance, is no doubt a very nice person. She and her family live in Claremont, and they are involved in the community. However, is she really worth $130,000 in salary and benefits (as of the end of 2006)? Is anybody? And she is relatively young. What will her pension be when she retires?

No wonder cities - not just Claremont - seek to hide their employee compensation and are willing to take any step, no matter how questionable to cut off access to that public information. But just look to Vallejo or San Diego to see what happens when elected officials ignore their financial responsibilities.