By Khalida Sarwari
The Campbell City Council this month approved a response to the Santa Clara County civil grand jury report that addressed the issue of controlling pension and other post-employment benefits costs.
The report, titled “An Analysis of Pension and Other Post Employment Benefits,” was released in June and required a response to the findings from all Santa Clara County cities that were reported upon.
The city agreed with some aspects of the report and disagreed with others. The finding that “public sector employees are eligible for retirement at least 10 years earlier than is common for private sector employees” found the city in agreement.
The report recommended that cities adopt pension plans to extend the retirement age beyond those in current plans, and the city responded that Campbell has created a second-tier pension plan for all of its employees that encourages working to a later age and reduces the incentive to retire earlier.
The city went on to say that Campbell is considering increasing employee contributions to help offset retirement costs in about two years when bargaining groups’ contracts expire, as well as continuing to explore other options for cost containment.
Another finding was that “retroactive benefit enhancements were enacted by cities using overly optimistic return on investment and actuarial assumptions without adequate funding in place to pay for them.” The city disagreed with this finding, stating that at the time investment returns were performing well and actuarial assets had grown.
“It is only with 20/20 hindsight that one can describe the ROI assumptions as ‘overly optimistic,’ ” the report read.
Campbell also disagreed with a recommendation that “cities should adopt policies that do not permit benefit enhancements unless sufficient monies are deposited … to prevent an increase in unfunded liability,” stating that further analysis was needed to determine whether such policies are warranted and that because deposits are based on a set of assumptions at that time, there is no guarantee that an unfunded liability would not arise in the future.
The city also disagreed with a finding that “the cities are making an overly generous contribution toward the cost of providing benefits,” stating that the finding is a generalization and that there is no standard in place to determine what constitutes a “generous” contribution.
Another recommendation that the city disagreed with is that “cities should require employees to pay some portion of the past service cost associated with the unfunded liability in proportion to the benefits being offered.” The city’s response was that there are other ways to have employees pick up a greater share of the cost of their retirement benefits, ways that can be determined through the meet-and-confer process.
“The city will consider implementing additional employee pickup of cost when bargaining group contracts are up for renewal,” the city stated in its response.
The Santa Clara County grand civil jury consists of members of the public who are appointed by a superior court judge and instructed to investigate operational and financial matters of local governments and make recommendations on areas that need improvement.
For more information about the grand jury and to read city responses, visit www.scscourt.org.
Campbell responds to the county civil grand jury’s report on employee pensions
