Pension costs have caused several recent high-profile municipal bankruptcies recently, so other cities are trying to avoid suffering similar disasters by asking employees to begin paying part of their pension costs.
In Sacramento, Calif., City Manager John Shirey said today he will hire 58 new police officers only if current officers agree to pay the employee share of their pension payments. The police union is one of few groups of employees in the city who don’t pay any of their own pension costs, according to the Sacramento Bee.
Most public pension plans are set up with a set contribution for employers and employees, but employee unions often negotiate for employers to pay both the employer share and some or all of the employee share, which makes pension payments a large chunk of many cities’ budgets. Bankrupt Stockton, Calif., for instance, owes the California Public Employees Retirement System $900 million.
Even if current officers agree to pay their share, Sacramento’s payments to the CalPERS, the country’s biggest pension fund, will increase by nearly $17 million by 2019 to make up for losses the fund took during the recession, according to the Bee.
“The pension costs really are the Pacman that’s eating our budget,” Shirey said.Baltimore Mayor Stephanie Rawlings-Blake introduced a bill today that would require city employees to pay part of their share to address $681 million in unfunded pension liabilities, according to the Baltimore Sun. The bill would require employees to put 5 percent of their salaries into the pension fund by 2018. Rawlings-Blake’s office estimates it would save $53 million over nine years, according to the Sun. “The costs of outdated benefits have crippled our ability to pay workers what they truly deserve in their paychecks,” the mayor said in a statement. “We must make tough choices to rebalance the way we compensate our hard-working employees by reforming unsustainable benefits and instead invest in better wages up-front.”