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.