Bud Emerson | Klish Way
Del Mar, like most California cities in the California Public Employees’ Retirement System (CalPERS), is grappling with a huge deficit in pension reserves for its city employees. Previous City Councils relied on CALPERS predicted investment returns which did not occur, partly because of two recessions. As a result we now face a couple of decades of unfunded liabilities. The Finance Committee is proposing an aggressive long term plan to build pension reserves to head off financial distress.
In thinking about this issue it is important to consider some national and local perspectives on public employee compensation. Our national retirement strategy for public and private employment since the ‘40s has been to make it possbile for workers to retire and continue to live decent middle class lives. The three-legged plan to achieve this goal was Social Security, employer pensions, and personal savings.
Two of those legs have become wobbly. In the last decade the trend in the private sector has been away from guaranteed pensions, and replaced by 401k-type plans which are dependent on the performance of the stock market. Reports from Australia where this trend started earlier indicates that poverty levels among retirees is on the rise.
All across the nation government workers are losing public sympathy because private sector wage and benefit declines are leading many to conclude that public employees have it too good. In fact, one study demonstrates that average local and state pensions are well below our national goal of middle class living standards in retirement. Despite rumors to the contrary, local government employees rarely get more than $2,000 a month in retirement pay.
Most California cities, including Del Mar, have another problem, only two legs on their retirement stool - they do not participate in the Social Security program. Years ago cities opted out with the intention of granting somewhat larger pension benefits to make up the difference. In addition, Del Mar has always had a policy of setting total compensation levels below the median level of other cities in the county.
Another factor is the ever-widening gap between upper and lower income levels, resulting in a shrinking middle class. Most cities took a big hit in the Great Recession and the federal government has expressed no interest in revenue sharing with local government as we did in the ‘70s. This inevitably results in a squeeze on governmental services, sometimes leading to scapegoating of public employees.
Del Mar has always been fortunate to attract talented and dedicated employees to serve our needs and interests. As we grapple with these difficult dilemmas of compensation, retirement, and services we need to stay vigilant in protecting their needs and interests.