You will recall that Stockton’s staked its solvency and recovery on cutting everything but public employee pensions. The previous city manager thought cutting them was a bridge too far; some observers thought the city missed a golden opportunity to reduce the city’s biggest remaining — and ballooning — debt.
Whatever the case, the city’s recovery is now tied directly to CalPERS, the state pension system. The problem there is that CalPERS’ pro-labor board has long ducked the true cost of pensions. As a result, the California state pension system is 30 percent short of the billions it needs to pay for pensions.
It needs more money. From all cities, including bankrupt Stockton.
Recently CalPERS lowered its projected return on investments. It basically admitted its rosy projections were unrealistic and that cities would have to pay more to fund pensions. That meant Stockton has to pay more. But the city saw this hike coming, and budgeted for it.
Now CalPERS has again raised its rates. This time it is making up for ignoring in its projections that retirees are living longer, thus requiring yet more pension money.
The city’s spokesperson is unavalable so it is not immediately possible to ascertain the hit to Stockton. But the California League of Cities estimates the rate hike would cost cities 0.1 to 5.9 percent of the general fund, “with a low end median of 1.3 percent and a high-end median of 2.5 percent,” according to this story.
This is the responsible thing for CalPERS to do. It sure beats fogging the true cost of the benefits it advocated for pensioners in an unethical attempt to keep said benefits politically sustainable. But it pinches the city. How much we will clarify in the hours and days to come. We must. Failure to monitor fundamental fiscals such as this is what led Stockton to insolvency.