Yesterday we asked if the rate hike by state pension system, CalPERS, wold put the hurt on Stockton (see item, below). The city spokesperson, Conie Cochran, says no.
“Unlike other cities, Stockton is out ahead of this change,” cochran writes. ”As you know, the City of Stockton has developed a sophisticated financial model that anticipates the impact of CalPERS changes 20 years into the future. We hired our own actuary (Segal), who sat down with PERS, to determine the future impact to Stockton pensions.
“The City’s forecast from Segal includes both the changes PERS has already enacted, which include smoothing and amortization, as well as the changes related to longevity that you are seeing in the news today.”
Or, if that’s too technical: “These costs will not overwhelm the City, as our forecasts are conservative.”
So the city (read: former City Manager Bob Deis) saw all this coming and budgeted for it. This forward-looking fiscal sophistication amounts to an outbreak of good government so unusual we’d be fools not to understand and appreciate it. I particularly like the part where other cities have been caught flat-footed by the pension rate hikes. But Stockton has it all sussed out.
Remember, as Cochran writes, “Stockton’s retirement reforms, achieved as a result of difficult labor negotiations and pre- and post-bankruptcy mediation, have produced a number of cost reductions with retirees and employees, including: eliminated retiree medical; employees now pay own employee portion of PERS (7% Misc; 9% Safety), resulted in immediate savings; legal spiking cut; eliminates higher retirement pay under Employer Paid Member Contribution (EPMC); two tier pension benefits with new hires 30-50% reduction; and compensation reductions of 9-23% have resulted in reduced pensions from what they would have been before compensation reduced.
“All these changes have resulted in 34 -50% overall retirement benefit loss for employees hired prior to 1/1/13 (Tier 1); new and future employees (Tier 2) overall retirement benefit reduction of up to 70%.”
I know that’s dry stuff. The point is — so far — the controversial decision not to cut pensions and take on CalPERS is working like a charm.