Regarding my 1-30-07 letter and Dave
Weaver's laconic answers: See the attached CalPERS
News excerpt; especially the GASB portion. I still wonder how Glendale will fare under
this rule. Maybe new Councilman Drayman can elicit a more detail answer from
City Staff.
Hank
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CalPERS News, Pension
Issues
This
year was the beginning of a very interesting year in the retirement area. In
December, the Governor signed an executive order establishing the Government Employees
Retirement System Funding Commission. The purpose of this commission will be to
identify the full amount of post-employment health care and
dental benefits for which California governments are liable
and which remain unfunded; evaluate and compare various approaches for
addressing governments' unfunded retirement health care and pension
obligations; propose a plan to address governments' unfunded retirement health
care and pension obligations. We will keep you posted on the progress of this
group. A final report will be submitted to the Governor and
Legislature by January I, 2008.
Also,
on January 11, 2007, the Howard Jarvis
Tax Group issued a pension study citing the excessive cost of pension benefits
for public employees and the level of unfunded liability of these plans. This
study cited costs that were inaccurate and misleading. It is unclear what the
Jarvis Tax Group plans to do with this study, but we can only imagine. CHCRS, the alliance that
RPEA participates in, is currently meeting to develop strategies to deal with
both of these proposals. Both the California Public Employees' Retirement
System (CaIPERS) and the California State Teachers'
Retirement System (CaISTRS) issued rebuttals to the
statements made in this report.
In
addition, former Assemblyman Keith Richman has been speaking to various groups on
the high employer costs for retirement benefits through the California Public
Employees' Retirement System (CaIPERS). The thing
that all of the pension attacks have in common is that
they are using numbers from the past five years to support their statement
rather than looking at
the costs for the last 10 or 15 years. The Retired Public
Employees' Association, in addition to CalPERS and CalSTRS has been responding
to the articles reporting on these issues and will continue to do so. We are
trying to let the public know that these reports are using data incorrectly.
GASB
In addition to the attacks on pension costs, there is also the impact of the
rules adopted by the Governmental Accounting Standards Board (GASB) that will go
into effect beginning in July 2007. GASB is a non-governmental entity that
issues rules for filing financial reports. The new rules require all public
employers
to identify the cost of post retirement benefits such as health and dental to
be reflected on their balance sheets if they have not paid for the benefits
before the employee retires. These post retirement benefits, unlike retirement
benefits, have typically been funded on a pay-as-go-basis in the past. Although
GASB requires the employer to reflect the amount of the obligation, it
does not require the employer to actually set the full amount aside. The
problem is that if the employer does not either set the full amount aside or
adopt a schedule to repay the obligation, then the liability could impact its
credit rating. This requirement, when applied to the private sector, resulted
in many employers dropping retirees from their health benefit plans. As a
result of
the pending GASB requirement in California, we are already
seeing public employers proposing to drop or decrease health benefits for their
retirees. The City of Sunnyvale recently took up
this issue at a city council meeting. The City of Sacramento attempted to
eliminate the subsidy they pay some of their retirees, and Placer County attempted to do the
same thing. In the case of the City of Sacramento and Placer County, retirees who live
in the area blocked these efforts. Sacramento will revisit the
issue in May. Placer County signed an agreement
for the next four years to leave the contribution in place. Retirees can make a
difference if they become involved at the local level. In Los Angeles County and the City of San Diego, retirees were not
as successful. Both of these public employers voted to eliminate health benefit
coverage for their retirees. GASB requirements have been used as the excuse. We
must keep an eye on what our former employers are doing. Vigilance can payoff.
Updates on these issues will be published when new developments occur.
RPEA NEWSLETTER · March April 2007