Thursday, October 23, 2014
FAIRFIELD-SUISUN, CALIFORNIA
99 CENTS

CalPERS changes will affect local governments

By
From page A1 | April 18, 2013 |

FAIRFIELD — Accounting switches being made by the California Public Employees’ Retirement System will likely mean higher payments for Solano County and local cities.

That in turn could leave local governments having to find more money, make cuts or do fewer service expansions, get employees to pay a higher share of retirement costs or use a combination of options to make up the difference. The big question is how much money will be involved.

“It won’t be small change,” Solano County spokesman Stephen Pierce said.

CalPERS provides the pension and health benefits to more than 1.6 million public employees, retirees and their families and for more than 3,000 employers across the state. It receives money through its investments, employer contributions and member contributions. Its unfunded liability is a reported $87 billion. The goal is cover that and future costs in 30 years.

The agency has used what it calls a “smoothing” method to reduce volatility in employer contribution rates. But CalPERS investments have seen large fluctuations in recent years, including a $57 billion loss in 2008-09.

Now CalPERS wants to smooth employer contribution rates over five years instead of 15 years. It’s an accounting change that will make a difference for counties, cities and school districts.

Solano County across all its various funds pays CalPERS about $23.8 million annually, Pierce said. He didn’t know Wednesday how much this might increase once the changes take effect in the 2015-16 fiscal year that starts in July 2015, adding there’s no simple formula.

“How it may affect one organization compared to another may be different,” Pierce said.

The county will need an actuary to figure out its increased costs, he said.

Solano County already faces an estimated $14.7 million general fund structural deficit next fiscal year, though it has savings to cover the amount. Left unchecked, this structural deficit could grow to $18.6 million in 2014-15 and $20.9 million in 2015-16, a county report said.

Pierce said higher CalPERS costs are included in such budget projections. The question is whether the estimates are high enough to cover the planned accounting changes. Another variable is how much an improving economy might send more money into county coffers to help cover CalPERS increases.

Amid all the unknowns, Pierce could make one certain statement: “It’s not an additional cost we want to have.”

Cities part of the equation

Local cities are also preparing for the changes.

“We’ve been tracking this issue for a couple of months,” said Jeremy Craig, Vacaville’s director of finance and technology.

Craig described the CalPERS issue as a cost escalation that the city can’t control. He said the city is a few years from feeling the financial pinch itself, but that it will hurt when it hits.

“Any new increase in cost to the general fund is just more stress,” he said. “Our pace of revenue growth has not come back from the recession, so any cost increases like this that are above the growth rate are going to put stress on the general fund.”

David White, deputy city manager and director of finance for Fairfield, said CalPERS is being open about what it is trying to accomplish with the change. That means higher rates in coming years.

“We should expect some very significant increases in rates during the ramp-up period,” White said Wednesday. “That’s been told to us, clearly.”

White the next step for the city is to review all of the information that CalPERS has released and make cost estimates so the city can revise its long-term budget projections. Other government agencies will likely do the same. Eventually, White said, CalPERS will let each agency know how much its annual rates will increase.

“All of us are in the same murky boat,” White said.

CalPERS rates were already set to increase to recoup losses from the Great Recession and its aftermath.

“This will be an additional increase,” White said.

Suisun City officials felt they didn’t have enough information on the change to comment, City Manager Suzanne Bragdon said. Rio Vista Finance Manager Mary Lee Sharer said she couldn’t comment on how the changes would affect the city until city staff does an analysis.

Schools brace for what’s ahead

Fairfield-Suisun School District Assistant Superintendent Kelly Morgan said she first read about change in a The Sacramento Bee and had that familiar feeling from past years.

“Oh great, another cut to education,” Morgan said. “It’s terrible to feel that way. It certainly doesn’t make me happy.”

She said it’s far too early to know how the changes set for 2015-16 will affect the district. At some point she will get advice from School Services of California and present the information to the board of trustees, Morgan said.

With any luck, she said, the financial situation will improve and the district could somehow absorb any extra costs. One of the alternatives would be to bargain with labor groups, which in the past has caused tension among the ranks.

The news comes just as the district’s finances are improving and it looks as no cuts will be made this year. Other financial obligations such as an increase in CalPERS could change that, she said.

“I think things are getting a lot better. But we still aren’t anywhere close to where we were five years ago,” Morgan said.

Kari Sousa, the Vacaville School District associate superintendent of business and administrative services, said that school districts are in a unique position with CalPERS. The state froze the rate for schools at 13.2 percent. Currently the district pays 11.4 percent to the retirement system but the state takes the remainder. It adjusts dependent upon the CalPERS figure, Sousa said.

“It’s created a stabilization for schools,” Sousa said. “For years and years (districts) have been able to budget that it’s going to be 13.2 percent. But it’s created an inherit volatility to the state budget.”

She’s heard numbers that could bring the employer rate up to 18.9 percent, but she’s uncertain what the reality will be, Sousa said. That depends on a host of factors, including the economy.

“We do have a certain amount of rate insulation because of that arrangement with the state,” she said. “I think there are going to be a lot of factors that will come into play before it affects the schools.”

Eye to the future

A CalPERS report said the expected results of the change are higher peak and median employer contributions over four years, but lower contributions in the long-term. The change would begin in 2015-16 for counties and cities and 2014-15 for the state pools and school plans, a CalPERS report said.

More rate hikes may be in store. CalPERS is also revisiting its assumptions on retiree mortality, White said, because people are living longer after they retire. That review is designed to make sure the retirement system is properly funded to account for current and future life expectancies.

“Today’s action is not the only potential rate increase in coming years,” he said.

White described the CalPERS changes as the latest in a series of economic realities cities and other local governments have faced in recent years. It’s not the three R’s of education, but rather the four R’s of California finance: recession, redevelopment, realignment, retirement.

“Who knows what the fifth R will be,” White said.

Susan Winlow, Danny Bernardini, Glen Faison, Amy Maginnis-Honey and Heather Ah San contributed to this report. Reach Barry Eberling at 427-6929 or beberling@dailyrepublic.net. Follow him on Twitter at www.twitter.com/beberlingdr.

Barry Eberling

Barry Eberling

Barry Eberling has been a reporter with the Daily Republic since 1987. He covers Solano County government, transportation, growth and the environment. He received his bachelors of art degree from the University of California, Santa Barbara and his masters degree in journalism from the University of California, Berkeley.
LEAVE A COMMENT

Discussion | 1 comment

The Daily Republic does not necessarily condone the comments here, nor does it review every post. Read our full policy

.

Solano News

Children run for the sake of running

By Susan Hiland | From Page: A1, 2 Comments | Gallery

 
 
60th Air Mobility Wing gets outstanding unit award

By Ian Thompson | From Page: A3

Real McCoy ferry to shut down Thursday

By Ian Thompson | From Page: A3

 
Nairobi, oldest giraffe at Six Flags, dies

By Amy Maginnis-Honey | From Page: A3 | Gallery

Day of Remembrance focuses on domestic violence prevention

By Amy Maginnis-Honey | From Page: A3 | Gallery

 
 
Audubon group to offer wetlands walk, bird workshop

By Susan Winlow | From Page: A4

 
 
Trailer rolls, knocks down pole, damages roadway

By Susan Winlow | From Page: A4

 
Pumpkin bob set at Fairfield city pool

By Ryan McCarthy | From Page: A5

 
Fairfield police log: Oct. 21, 2014

By Susan Hiland | From Page: A12

Suisun City police log: Oct. 21, 2014

By Susan Hiland | From Page: A12

 
.

US / World

Canada’s PM says shooting rampage was terrorism

By The Associated Press | From Page: A1, 1 Comment

 
Davis votes to return armored vehicle

By The Associated Press | From Page: A5, 2 Comments

Study looks at lane splitting in California

By The Associated Press | From Page: A5, 4 Comments

 
125 San Francisco inmates to get computer tablets

By The Associated Press | From Page: A5, 5 Comments

California malpractice cap generates big spending

By The Associated Press | From Page: A5, 1 Comment

 
Huge gold nugget going up for sale in California

By The Associated Press | From Page: A5

Healdsburg bans tobacco sales to anyone under 21

By The Associated Press | From Page: A5, 3 Comments

 
AP-GfK Poll: Public wants tighter Ebola screening

By The Associated Press | From Page: A6

Key features of rigorous new US Ebola monitoring

By The Associated Press | From Page: A6

 
Goofy dinosaur blends Barney and Jar Jar Binks

By The Associated Press | From Page: A6

Social Security benefits get another tiny increase

By The Associated Press | From Page: A6, 2 Comments

 
US to track everyone coming from Ebola nations

By The Associated Press | From Page: A6, 2 Comments

Teens’ travel renews concerns about terror appeal

By The Associated Press | From Page: A6

 
Blackwater guards found guilty in Iraq shootings

By The Associated Press | From Page: A6, 1 Comment

Methodist panel hears appeal over gay wedding

By The Associated Press | From Page: A6

 
Analysis: Fowle was North Korea’s easiest US case

By The Associated Press | From Page: A10

UK man faked coma for 2 years to avoid court

By The Associated Press | From Page: A10

 
Missile, fire from Egypt wounds 2 Israeli troops

By The Associated Press | From Page: A10

Mexico: Mayor linked to deadly attack on students

By The Associated Press | From Page: A10, 2 Comments

 
Nigeria truce is shaky, no news of abducted girls

By The Associated Press | From Page: A10

Iraqi Kurdish lawmakers OK fighters for Syria

By The Associated Press | From Page: A10

 
Prisons agree to end race policy

By The Associated Press | From Page: A12, 4 Comments

.

Opinion

 
Don’t make this mistake after voting

By Kelvin Wade | From Page: A11, 2 Comments

Editorial Cartoons: Oct. 23, 2014

By Daily Republic Syndicated Content | From Page: A11

 
Living a Democrat PC nightmare

By Letter to the Editor | From Page: A11, 24 Comments

Real reason to vote yes on 46

By Letter to the Editor | From Page: A11, 3 Comments

 
Keck did good job researching issue

By Letter to the Editor | From Page: A11

.

Living

Today in History: Oct. 23, 2014

By The Associated Press | From Page: A2

 
Community Calendar: Oct. 23, 2014

By Susan Hiland | From Page: A2

 
Horoscopes: Oct. 23, 2014

By Holiday Mathis | From Page: A9

My husband visits dating sites, stays out until 3 or 4 a.m.

By Kathy Mitchell and Marcy Sugar | From Page: A9

 
.

Entertainment

TVGrid

By Daily Republic Syndicated Content | From Page: B6

 
NBC promoting Weir, Lipinski to top skating team

By The Associated Press | From Page: A7

 
Annie Lennox embraces jazzy ‘Nostalgia’

By The Associated Press | From Page: A7

Renee Zellweger: ‘People don’t know me in my 40s’

By The Associated Press | From Page: A7

 
Sax player behind ‘Baker Street’ solo dies at 60

By The Associated Press | From Page: A7, 1 Comment

.

Sports

AP source: Goodell told to testify in Rice appeal

By The Associated Press | From Page: B1 | Gallery

 
Kings measuring success on ‘wins and losses’

By The Associated Press | From Page: B1

Giants’ bullpen melts down in 7-2 loss to Royals

By The Associated Press | From Page: B1

 
Warriors hoping Kerr is final piece for title run

By The Associated Press | From Page: B1 | Gallery

Local Report: Armijo XC teams finish MEL 10-0

By Daily Republic staff | From Page: B1

 
Carr confident despite Raiders’ winless start

By The Associated Press | From Page: B1 | Gallery

Phony World Series tickets, merchandise seized

By The Associated Press | From Page: B2

 
Request denied to remove judge on Peterson case

By The Associated Press | From Page: B2

Probe: UNC academic fraud was ‘shadow curriculum’

By The Associated Press | From Page: B2

 
World Series rating for opener drops to low

By The Associated Press | From Page: B2

Beaten Giants fan shows significant progress

By The Associated Press | From Page: B2

 
Polian, Wolf nominated for Pro Football Hall of Fame

By The Associated Press | From Page: B2

Slumping Bears hope to slow No. 6 Oregon, Mariota

By The Associated Press | From Page: B2

 
Stanford picked to win Pac-12 regular-season crown

By The Associated Press | From Page: B2

NBA owners fail to pass lottery reform

By The Associated Press | From Page: B2

 
Leafs-Senators game postponed after shootings

By The Associated Press | From Page: B2

Brad Keselowski not concerned with popularity

By The Associated Press | From Page: B3 | Gallery

 
SHR swaps crews for Danica Patrick and Kurt Busch

By The Associated Press | From Page: B3 | Gallery

From Mexico to the World Series, Petit Giants’ shines

By The Associated Press | From Page: B4 | Gallery

 
’85 World Series Royals relishing playoff run

By The Associated Press | From Page: B4 | Gallery

 
This date in sports history for Thursday, Oct. 23, 2014

By The Associated Press | From Page: B5

.

Business

FedEx, UPS make plans for a better holiday season

By The Associated Press | From Page: B6

 
The top 20 US cities for tech startup funding

By The Associated Press | From Page: B6

‘Silicon Beach’ brings tech boom to Los Angeles

By The Associated Press | From Page: B6

 
Government ups air bag warning to 7.8M vehicles

By The Associated Press | From Page: B7

Camel maker Reynolds snuffs out workplace smoking

By The Associated Press | From Page: B7

 
BofA to refund Apple Pay customers charged twice

By The Associated Press | From Page: B7

Google unveils app for managing Gmail inboxes

By The Associated Press | From Page: B7

 
.

Obituaries

Dr. Robert M. Takamoto

By Nancy Green | From Page: A4

 
Mark Dean Lindsay

By Nancy Green | From Page: A4

Keith Bowen

By Nancy Green | From Page: A4, 1 Comment

 
Blanche Stevens

By Nancy Green | From Page: A4

.

Comics

Beetle Bailey

By Daily Republic Syndicated Content | From Page: A8

 
Dilbert

By Daily Republic Syndicated Content | From Page: A8

Peanuts

By Daily Republic Syndicated Content | From Page: A8

 
Frank and Ernest

By Daily Republic Syndicated Content | From Page: A8

Rose is Rose

By Daily Republic Syndicated Content | From Page: A8

 
Baby Blues

By Daily Republic Syndicated Content | From Page: A8

Garfield

By Daily Republic Syndicated Content | From Page: A8

 
For Better or Worse

By Daily Republic Syndicated Content | From Page: A8

Blondie

By Daily Republic Syndicated Content | From Page: A8

 
Pickles

By Daily Republic Syndicated Content | From Page: A8

Get Fuzzy

By Daily Republic Syndicated Content | From Page: A8

 
Wizard of Id

By Daily Republic Syndicated Content | From Page: A8

B.C.

By Daily Republic Syndicated Content | From Page: A8

 
Sally Forth

By Daily Republic Syndicated Content | From Page: A8

Zits

By Daily Republic Syndicated Content | From Page: A8

 
Baldo

By Daily Republic Syndicated Content | From Page: A8

Cryptoquote

By Daily Republic Syndicated Content | From Page: A9

 
Bridge

By Daily Republic Syndicated Content | From Page: A9

Crossword

By Daily Republic Syndicated Content | From Page: A9

 
Sudoku

By Daily Republic Syndicated Content | From Page: A9

Word Sleuth

By Daily Republic Syndicated Content | From Page: A9