Employee benefits puts Berkeley $310 million in debt

January 9, 2011

New figures being released indicate that the City of Berkeley, which recently gave its city manager a hefty salary increase , has $310 million in unfunded liability for promised employee benefits. [Contra Costa Times]

A report by the City Auditor  suggests the current debt  is equal to more than two years of city general fund revenues. It works out to about $197,000 for every full-time city employee. Taxpayers must pay it off, at a cost of about $3,000 for every city resident.

The biggest factors driving the debt are the city’s unfunded liability for a pension plan that allows some workers to collect more in retirement than on the job; overly generous promises of health care coverage for police in retirement; and a “ridiculous vacation and sick leave accrual policy” that costs the city millions and enables employees to spike their pensions.

The report calls for Berkeley to eliminate more than 60 city jobs, or about 4 percent of the municipal workforce.

Meanwhile, because of the mounting pension debt, Berkeley will be forced to divert more city funds to its retirement program in future years. For every dollar the city pays in police salaries, it pays another 36 cents for pensions. That number is expected to increase to 51 cents by 2016. For firefighters, the cost is 25 cents on the dollar, expected to rise to about 44 cents in five years. And for other city workers, the cost is 24 cents on the dollar, expected to increase to 34 cents.

The city also provides retirement health care. The program for police is exceptionally costly because the city directly pays its retired officers with 20 years’ experience an amount equal to the total cost of Kaiser coverage for two people, regardless of the rising costs of health care and regardless of whether the retirees have spouses or partners.

Moreover, the payments continue at the full rate even after the retired officer becomes eligible for Medicare and could obtain a much less-costly Kaiser plan.

Berkeley city employees may also accrue up to 320 hours of vacation time and 1,600 hours of sick leave. Firefighters and police can accrue up to 360 hours of vacation time and have no cap on accrued sick leave.

At retirement, they can cash out all vacation time and up to 50 percent of sick leave. Or, they can apply all their unused sick leave to service credit for calculating their pensions.

City officials had no immediate comment about the report.

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California and its hundreds of local governments are just now waking up to the truth of the devastating catastrophic crises that public employee pay & benefits, and their lifetime pension & benefits have reached such an incredible level of unsustainable and unrealistic financial burden on states ability to provide even the least minimal public services while continuing to pay for unfunded and severely escalating pay, benefits and lifetime pension costs. Many public employees can now retire with life time annual pensions that are greater than their working salaries.

The insanity must stop. Unfortunately this crises will only be solved when the state files for bankruptcy protection and the courts eliminate the union contracts promising life time payouts and how they are calculated. Sooner than later we will even see some cities and special district file bankruptcy and dissolve in order to escape unfunded public pension liabilities.

It is in the Public employee unions and retirees best interests now to start negotiating ending unfunded promises and reduce current pension and benefits to both future and current retired persons before the courts eventually void them all together and leave them with pennies on the promised dollar.

State law must be amended to allow public employees to retire with 2% of each year work with a maximum of 50% of their last 5 year average salary exuding overtime and special pay. The law must be amended to allow a maximum annual pension of 1 year for every year worked. IE: retirement after 25 years, earns a annual pension that expires in 25 years.

The ONLY difference here is the crimes have been committed by the Unions rather than the Council.

Um, NO. In the city of Bell, those city council members that violated the law were arrested; no one in Berkeley who is a member of a union has been arrested because they are a member of a union, no union official has been arrested because there has been no “crime” (definition: “A crime is an offence against a public law. This word, in its most general sense, includes all offences, but in its more limited sense is confined to felony.”) Show me where a true crime has actually been committed by a union in the city of Berkeley, and I will acknowledge your being correct. Otherwise, quit hating on unions; unions are one of the only true examples of democracy in action. All of the leaders of unions are elected to their positions, and if the members no longer want someone in their position, they can elect someone else.

Wake up, bobfromsanluis. Unions ARE a huge part of the economic demise this Nation is dealing with today. If you fail to see the correlation then it would be even more obvious that your head really IS in the sand.

I will agree that the pensions and healthcare for government retirees is becoming a larger and larger part of what is contributing to the problem of government funding. The only real correlation is in the amount of revenue governments take in and the reduction in how much corporations and the wealthy pay in taxes and fees. Unions accounted for about thirty percent of the workforce up until the 1980s and the impact they had on the middle class in indisputable. Every job that was not at minimum wage was higher than it would have been without unions around; as the attack on unions ramped up during the Reagan Administration and continued on during Bush I, that attacks that were amplified by the signing of NAFTA by Clinton, and then the renewed attacks on unions by George W. Bush in the name of “national security”, we now have an average union membership of the workforce of below ten percent.

If you cannot or will not admit that big business has been able to ship our jobs overseas, that they pay less and less in taxes and still be able to use our infrastructure, then I believe that it is you sir, that has his head in the sand. Most likely you don’t feel that business is paying any more than it should, or perhaps you feel that they pay too much; if that is how you feel, you will never acknowledge anything other than we need to cut all government spending and let corporations do anything they want, be it pay third world wages to American workers or ignore safety regulations or environmental rules. It would be a serious mistake to turn America into a third world nation.

“Bell of the north?” No, more like the San Luis Obispo of the north. The very first SLO City employee that I compared wages, benefits, and compensation to the City of Berkely was an eye opener. SLO City Manager Katie Litchtig makes a total of $311,252.00 in total wages, benefits, and other compensation. The Berkeley City Manager (with upcoming raise) will make only $241,156.00 in total wages and other blah, blah. Litchtig makes a total of $70,096 more per year total!! Total poulation of Berkeley is a little over 102k, more than double the size of SLO. I have yet to compare other city employees, but so far it’s not Berkeley that has the problem.

One carefully chosen example does not a comparison make.

“The Bell of the North”; what an idiotic comment. The problems that have happened in the City of Bell were due to city leaders committing CRIMES; the example here of Berkeley is due to unfunded mandates in the forms of pensions and health care costs for retirees. How can you even compare the two? Most likely you are one of those who believe that public employees are “THE” problem, no matter what the situation is. All of the noise being generated as venom towards public employees as the root cause of any government operating in a negative revenue problem is just an attempt to deflect attention away from the real problem, as illustrated in this article here. Why can’t we have a real debate about government funding; conservatives attack Democrats as “tax and spend” all the while claiming that they are “fiscally responsible” when in reality the plan of Republicans has been in the past few years to simply “cut and borrow”, whether it is to cut taxes for the rich and/or corporations or cut spending on programs that benefit those who are not wealthy, and then claim that government is broke and cannot afford to pay for social programs that help those most in need. Read the article, please before you state that the problem is public employees ONLY.

The problem is not the troops in the trenches, the problem is management (still employees). They have devised these big pensions plans for the employees and create their own ponzi … Let’s see, the police officers get a big raise through mediation error by management. Well, now we have to raise police officers salaries to keep balance, oh yea, now we have we raise the Police Chief salary (balance in those pay steps). Oh yea, we now have to keep the firemen in balance, and their officers, and please don’t forget the Fire Chief. Now the Ponzi has to reward the City Manager, City Attorney, Finance Director, Planning Director and of there is Public Works, Recreation and the Utilies Depts. And just so you all know, none of the employees are forfeiting their pay increases (2/3 years now) they are DEFERRING them. When the economy recovers they will be back paid and again their salaries will create another PONZI… Nice!

bob, while I disagree w/some of what you say I do agree with your criticism of the Republicans and their false claim to be “fiscally responsible.” And I’m a conservative who usually votes GOP!! I still would characterize Democrats as “tax and spenders” but sadly the Republicans have NOT been fiscally conservative or responsible for quite some time. And we can also agree that yes, there are corporate tax loopholes that need to be closed. So, just curious–how do you feel about an across the board flat income tax??

Flat income tax? Seriously? No. There are some individuals in almost every income category that really don’t neatly fit into that particular “box” and should have the ability to “write off” or deduct from their taxes for certain expenses. People who run their own business, be it a very small operation or a much larger one (the upper medium and large ones are all mostly incorporated, which is a whole different ball of wax) should have an incentive to go out on a limb when they create a business that many will never attempt because it is so uncertain. Should a couple who make a certain income, say $100k just as an example, be taxed at the very same rate as a single individual who also makes $100k a year? It would be conceivable that the couple would need to pay for daycare and/or additional medical expenses that an individual may not have to consider; does it really make sense then that they should pay the same amount? I personally don’t think so. I will agree that our tax code should be easier to understand and follow, but if you are going to propose a “flat tax”, are you suggesting that all corporations pay the same amount? Are you aware of the fact that many companies that are incorporated in the US don’t pay ANY corporate taxes, at all? If your proposal for a flat tax is to include corporations, it will never see the light of day since corporations have such a firm grasp on the mechanisms of our Congress.

And any comments about Republicans being “cut and borrow”? How many times did Arnold attempt to pass ballot measures so we could “borrow” more? How come the Bush Administration never put the costs of the wars in Iraq and Afghanistan on the books, but only spent by “emergency” measures for those expenses?

Unfortunately, I have to agree with the phrase “cut and borrow”. I’d rather it just be “cut, cut and cut some more” because our country is broke.

As for the tax code, I’m not sure but probably no, I wouldn’t include corporations in the flat tax concept. I’m thinking just for individuals.

PP: Um, what “cutting” are you advocating? More tax cuts, or spending cuts? I can assume that you mean spending cuts, but you did not distinguish what “cuts” you meant.

And then the tax code: “I wouldn’t include corporations in the flat tax concept. I’m thinking just for individuals.” Wow. So many of the Fortune 500 companies pay NO corporate tax AT ALL, and that is apparently just peachy with you? Are you aware that from WWII through the 1980s we had up to fifteen tax rates for individuals? Up until President Kennedy changed it, the highest tax rate was 90 %! It is called a “graduated” or “progressive” tax situation, and at this time those that make as much as they can are inline to pay a maximum of 35%, but most of them have it down where they pay around 15% based on their deductions. That is the only part of a “flat tax” that makes sense, but it will never happen because those in the upper 10 to 1 % don’t want the system to change and they have the purse strings to be able to influence our lawmakers. It won’t happen, period. Are you aware that the revenue our country ran on up until the civil war was tariffs? Income tax didn’t even start until the 20th century; because our government wanted us to produce goods on our own soil by our own citizens, we “taxed” imported goods to the point that it made as much sense to make the stuff here as it did to import it. Why has that changed, you may ask? Supply-side economics, championed by the right, mostly enacted during the Reagan Administration, further enabled by Clinton signing NAFTA and the GATT treaties. Corporations do not pay their “fair share” and this the main crux of our situation in government funding, with wasteful spending following in a close second. Take a look at the proposal by the Secretary of Defense, he “gets it” about wasteful spending (to a small degree; I disagree with him about making our veterans pay more for their medical care.).

As go our cutting edge cities, so goes our country.

The Bell of the North…

Get ready because a reckoning is coming.