by Venturans for Responsible & Efficient Gov’t (VREG)
America’s significant retirement pension funds are underfunded by an unfathomable $4.2 Trillion. Thousands of Americans each year find themselves with a mis-sold pension and finding themselves out of pocket. Ventura mirrors this phenomenon. Ventura workers participate in the state pension fund, CalPERS. CalPERS is only 71% funded as of June 30, 2018, despite a 10-year bull market and a growing economy.
Because of the chronic funding shortfall, CalPERs demands increases of at least $2 million per year for five to six consecutive years, and then remain at those levels. Ventura’s pensions are underfunded by $215.1 million.
We respect the work city employees do. Our concern is about the structure by which their retirement is accumulated and paid after retirement.
Most government pension benefits are considered to carry a virtually iron-clad guarantee to the civil workers. Even the smallest attempts to alter future benefits have been met with furious opposition. Governments at all levels are hamstrung between their duties to provide on-going services to their citizens and their ever-increasing financial obligations to pension funds.
A typical city employee would receive a pension almost the same as his or her working salary if they participated for their whole career. The years in retirement can still equal or exceed those worked.
Discussions about pensions get emotional because we’re talking about people’s future and security. What gets lost in the arguments is this. The law and politics guarantee retirement pension benefits, but not the actual returns on investments. The myth is that pensions are safe. They are not. The difference is that taxpayers pick up the difference between reality and what politicians promised.
Politicians have made many attempts to improve the current system, but none have addressed the problem in a meaningful way.
League of California Cities and Government Finance Officers Association recommended actions to confront unsustainable pensions.
1. Reduce the unfunded liability by making annual catch-up payment even more than CalPERS instructs you to pay-if you can afford to pay more.
2. Raise taxes
3. Reduce services
4. Require voter approval of any pension obligation bond, or POB.
These are terrible choices for the public.
There are two other choices for our City Council to consider if they have the political will to do anything about this crisis that will cripple the City of Ventura.
1. Make beneficiaries pay more. Capping the employer contribution at a fixed percentage of salary would cut pension costs for the city. As pension costs increase over the years, the employees will pay all the costs associated with the growth.
2. Change when retired city employees may begin collecting pensions. This alternative solution applies to new employees only. Why would that help? The reason is that even if the city makes no further contributions, the fund will have ten more years to grow. Also, the retirement payment period would be ten years shorter, given the same life expectancy.
Think about it. Today, public employees can get generous pensions by age 50 or 55. Private sector employees don’t get their full social security until 65 or even 67, depending the year they were born. Moreover, Social Security is only going to be one quarter to one-half of your working earnings.
Even with an unprecedented bull market, Ventura’s unfunded pension liability grew over the past ten years faster than market returns can ever expect to make up. CalPERS annual demand will now permanently increase by about $2 million per year for the five to six years and then stay there. Something has to change. Otherwise, the city will either cut back needed services, raise taxes, or both.
Changing the system is the only way these promised benefits can be truly sustainable and dependable for retirees. It’s also the only way that taxpayers can afford to pay for them.
