Sunday, September 14, 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

The show goes on for American Canyon comic

By Amy Maginnis-Honey | From Page: C1

 
David Lew: Chuckles keep coming despite cancer battle

By Amy Maginnis-Honey | From Page: A1 | Gallery

 
Walk to End Alzheimer’s brings out supporters

By Susan Hiland | From Page: A3

Council candidate leads cleanup day, youth rally

By Susan Hiland | From Page: A3, 6 Comments | Gallery

 
How to help prevent sports-related eye injuries

By Betsey Campbell, MPH | From Page: C4

Birthday party brings writers, musicians in Fairfield

By Ryan McCarthy | From Page: A4 | Gallery

 
Beware of invading plant species

By Kathy Low | From Page: C4, 2 Comments

 
Vacaville Grad Nite needs volunteers

By Susan Hiland | From Page: A5

CHP announces senior driving class

By Susan Hiland | From Page: A5, 7 Comments

 
Solano drug court plans reunion

By Jess Sullivan | From Page: A5

 
Time to sell? Who can say with certainty?

By Bud Stevenson | From Page: B7

Nut Tree Airport to see runway work

By Barry Eberling | From Page: B7, 1 Comment | Gallery

 
Risk a key factor in investment decisions

By Mark Sievers | From Page: B8

 
County graduates complete basic training

By Nick DeCicco | From Page: B10

Suisun City police: Sept. 12, 2014

By Susan Hiland | From Page: A12

 
Fairfield police log: Sept. 12, 2014

By Susan Hiland | From Page: A12, 1 Comment

.

US / World

AP Enterprise: al-Qaida’s Syrian cell alarms US

By The Associated Press | From Page: A1

 
Football coach moves game for daughter’s wedding

By The Associated Press | From Page: C2

 
The old ways are no way for Army drill sergeants

By Mcclatchy-Tribune News Service | From Page: C6

Rescuers end ocean search for Navy fighter pilot

By The Associated Press | From Page: A6

 
2 homes destroyed in Northern California wildfire

By The Associated Press | From Page: A6

Feds chase treasure hunter turned fugitive

By The Associated Press | From Page: A7

 
Will Apple’s digital wallet kill the card swipe?

By The Associated Press | From Page: A10

Transgender girl crowned homecoming princess

By The Associated Press | From Page: A10

 
Man sues after losing 5 toes in Colorado jail

By The Associated Press | From Page: A10, 1 Comment

Syrians attacked in Lebanon after soldiers killed

By The Associated Press | From Page: A11

 
Ukraine government repels rebel attack on airport

By The Associated Press | From Page: A11

Pope urges world to shed apathy toward new threats

By The Associated Press | From Page: A11 | Gallery

 
.

Opinion

 
Just take care of it

By Letter to the Editor | From Page: A8, 12 Comments

 
Campaign signs mean little, really

By Glen Faison | From Page: A8, 4 Comments

Hold the line with Local 39

By Daily Republic | From Page: A8

 
Editorial Cartoons: Sept. 14, 2014

By Daily Republic staff | From Page: A8

Sound off for Sept. 14, 2014

By Daily Republic | From Page: A8

 
Know of any new taxes?

By Rod Keck | From Page: A9, 14 Comments

 
President a success or failure?

By Thomas Sowell | From Page: A9, 11 Comments

Scottish independence tied to national identity

By Megan Mcardle | From Page: A9

 
.

Living

Community Calendar: Sept. 14, 2014

By Susan Hiland | From Page: A2

 
Today in History: Sept. 14, 2014

By The Associated Press | From Page: A2

‘Tammi’ and I are getting serious, but her friends don’t like me

By Kathy Mitchell and Marcy Sugar | From Page: C4

 
Horoscopes: Sept. 14, 2014

By Holiday Mathis | From Page: C4

.

Entertainment

PUBLISHERS WEEKLY BEST-SELLERS

By The Associated Press | From Page: C7

 
Americans Ferris, Fowler on Booker Prize shortlist

By The Associated Press | From Page: C7

NASCAR’s Kenseth behind anti-bullying kids’ book

By The Associated Press | From Page: C7

 
TVGrid

By Daily Republic Syndicated Content | From Page: B11

.

Sports

Solano volleyball preview: Falcons look to repeat as BVC champs

By Paul Farmer | From Page: B1 | Gallery

 
49ers look for win against Bears in Levi’s opener

By The Associated Press | From Page: B1 | Gallery

Raiders’ Carr to make home debut vs. familiar foe

By The Associated Press | From Page: B1 | Gallery

 
Rodney walks in run in 10th to give A’s 3-2 win

By The Associated Press | From Page: B1 | Gallery

Mayweather remains unbeaten despite bite complaint

By The Associated Press | From Page: B2

 
Travis Bowl results

By Daily Republic | From Page: B3

Stars Recreation results

By Daily Republic | From Page: B3

 
Contador beats Froome to win Vuelta 20th stage

By The Associated Press | From Page: B3 | Gallery

DeJoria, Enders-Stevens top NHRA qualifying

By The Associated Press | From Page: B3

 
McIlroy, Horschel tied for Tour Championship lead

By The Associated Press | From Page: B4

No. 15 Stanford rebounds from loss, tops Army 35-0

By The Associated Press | From Page: B4 | Gallery

 
College football Top 25

By The Associated Press | From Page: B4

This date in sports history for Sunday, Sept. 14, 2014

By The Associated Press | From Page: B5

 
Sports on TV for Sunday, Sept. 14, 2013

By Paul Farmer | From Page: B5

Kyle Busch wins Trucks Series race

By The Associated Press | From Page: B6

 
Kevin Harvick wins again for JR Motorsports

By The Associated Press | From Page: B6

Where’s the tape? America responds to video

By The Associated Press | From Page: B6

 
Ambrose leaving NASCAR to return to Australia

By The Associated Press | From Page: B6

Gordon covets elusive 5th title as Chase begins

By The Associated Press | From Page: B6

 
Rice saga puts quiet Ravens owner in spotlight

By The Associated Press | From Page: B6

Peterson booked and released from Texas jail

By The Associated Press | From Page: B6

 
.

Business

Hackerspaces help techies turn ideas into reality

By The Associated Press | From Page: B7

 
On the money: Options abound for selling used mobile phones

By The Associated Press | From Page: B7

US threatened Yahoo with huge fine over emails

By The Associated Press | From Page: B8

 
Recalls this week: smoke alarms, generators

By The Associated Press | From Page: B12

Tech Tips: Sprint’s good rates come with a price

By The Associated Press | From Page: B12

 
Sponsors keep close watch on NFL investigation

By The Associated Press | From Page: B12

.

Obituaries

Patricia C. “Pat” Child

By Nancy Green | From Page: A4

 
Barbara J. McGee

By Nancy Green | From Page: A4

Olga Mae Schaffer Lilienthal

By Nancy Green | From Page: A4

 
Minnie Lee Dixon

By Susan Hiland | From Page: A4

.

Comics