Long Beach has 360 former employees who received pensions of $100,000 or more in 2016, which ranks it sixth among the state’s 10 most populous cities, according to report by Transparent California released Wednesday.
The Transparent California project, which is part of the Nevada Policy Research Institute’s work, describes itself as a think tank promoting free markets and limited government. The group’s research director Robert Fellner said he doubts governments will be able to continue paying out pensions at current levels.
“We don’t advocate for any particular reforms, but we do think it’s a real problem, and it needs to be addressed,” he said.
The think tank also tracks the compensation of public employees working in its home state.
Long Beach city officials are projecting that their own pension obligations will rise significantly for the foreseeable future. Those costs are a factor that may result in City Hall going into the red during the fiscal year that begins in October 2019, according to the city’s current budget proposal.
Leaders of the unions representing Long Beach police officers and firefighters say retirees who worked in their fields deserve six-figure pensions, given the demands and pressures of law enforcement and firefighting work.
“The questions are what is the officer worth, and what can we afford? We’ll never be able to pay them what they’re worth,” said Jim Foster, vice president of the Long Beach Police Officers Association.
Pension and salary costs reflect what could be considered to be the “market rate” for police officers, he also said.
The ‘$100K Club’
Long Beach is home to more than 480,000 people, which is enough for the city to rank seventh in the state in terms of population. City government has 360 former employees receiving pensions of $100,000 or more, which puts it in sixth place among California’s 10 most populous cities.
The California city with the most retirees whose pensions top the $100,000 mark? San Francisco, where more than 2,100 former city employees are in what Transparent California describes as a “100K Club.”
Los Angeles, the state’s most populous city with its 4 million-plus residents, is next with more than 1,900 retirees from city service receiving pension benefits of $100,000 or more.
Los Angeles and some other cities have their own pension systems. People working for Long Beach’s city government, as well as many other municipalities and state agencies, have their pensions administered by the California Public Employees Retirement System, or CalPERS.
For CalPERS agencies, Fellner said he obtains pension data directly from that agency.
CalPERS made nearly 647,000 individual payments adding up to more than $20 billion last year, according to Transparent California.
Roughly 22,800 people received pensions of greater than $100,000 from CalPERS in 2016.
City governments and other taxpayer-funded agencies don’t bear the full burden of pension payments, but Fellner said he thinks it’s unfair for Californians who work in the private sector — and likely don’t have as lucrative retirement benefits — to pay taxes that support retirement payments.
Defending pensions, Long Beach Professional Firefighters President Rex Pritchard said it’s not realistic to expect someone who is capable of working as a firefighter at the age of 50 to continue to perform those kinds of duties until the age of 70.
Pension costs are an old issue for cities such as Long Beach and other cities up and down the Golden State, and debates over the subject were particularly severe during the Great Recession and its aftermath, when local governments’ budgets tended to be on the lean side.
In Long Beach, city managers attempted to constrain pensions even before the recession, reducing benefit plans for nonsafety employees in 2006.
Later, in 2012, Gov. Jerry Brown signed a bill that set a lower cap for general employees’ pension formulas and also set a limit to pension formulas for police and fire employees.
The following year, Long Beach officials declared complete pension reform at the city level by reaching accords with city unions that increased employees’ compensation in exchange for requiring city workers to increase their personal contributions to CalPERS.
“The city has publicly stated, and we agree with them, that we’ve achieved full pension reform,” Pritchard said.
Pensions are paid through a combination of CalPERS investment returns and contributions from both employers and employees, Long Beach assistant finance director Lea Eriksen said. When investment returns and employee contributions are insufficient to pay off obligations, employers pay the remainder.
Eriksen said pension reforms reduced City Hall’s pension obligations for the coming fiscal year by nearly $25 million, of which nearly $14 million would have otherwise had to have been drawn from the general fund that finances city services like policing, firefighting, parks and libraries.
Although CalPERS reported a preliminary investment return of 11.2 percent for its holdings during the 2016-17, budget year, Long Beach is still predicting large increases in its pension costs — as much as $10 million a year for the next few years. Pension costs are not projected to peak until 2031.
Eriksen said city officials will work in the future to develop short- and long-term proposals to balance the budget.
“We’re not going to wait until March in next year,” she said.
March is when city management typically presents its fiscal outlook for the coming budget year.
For now, Long Beach is projected to end its next fiscal year with a $100,000 surplus. That projection, however, relies on more “optimistic” method than utilized in prior years.
A $10.4 million deficit is presently projected for Fiscal 2019.