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Pacific Grove Pension Reform

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PG Pension Reform - Fact Sheet


  • NOTE: underlined text indicates a link to supporting documents.

  • In 1999, after 15 years of average returns of 14% on CalPERS retirement fund investments the statewide pension fund was over funded by about 40%.

  • Public safety unions pressured the legislature to increase their retirement benefit from 2% at 50 to 3% at 50, a 50% increase, retroactive to the date of hire, to absorb this surplus. The state complied. Cities and counties throughout California were then pressured to do the same.

  • During 2000-2002 the dotcom bubble burst and CalPERS began to suffer significant losses. In 2001 they suffered a loss of over 7%. At the time CalPERS required returns of over 7.75% to meet its liabilities. The rationale for the pension increase, the surplus, began to steadily disappear. Nevertheless…

  • In late 2001, the City agreed to MOUs with public safety employees to increase the public safety (fire and police) retirement benefit from 2% at 50 to 3% at 50, retroactive to the date of hire. This was to go into effect by July 1, 2002.

  • An ordinance to implement the MOUs was introduced in public on the Consent Agenda for the Council meeting of April 3, 2002. The fiscal impact was given in the Staff Report to be 1.516% of total salary cost or $51,500.

  • The pension benefit increase was finally approved on June 5, 2002 and the fiscal impact was still given as 1.516% of salary or $51,500.

  • State law (Gov Code 7507) mandates that before any CalPERS contract amendment to provide a pension benefit increase is actually implemented that the local agency hire an enrolled actuary to analyze the costs of the contract amendment and the results be publicly disclosed before the contract is approved. Another state law required that the analysis by the actuary be made available to the employee unions as well. None of this was discussed or explained to the Council or the public in 2002, and no cost analysis of an actuary was ever disclosed to the public or the Council. Even so, the city certified that it had.

  • In 2009, a citizen investigating the approval of the increase to 3% at 50, discovered, through a public records request, the existence of letters between CalPERS and Ross Hubbard, City Manager in 2002 and a seven page cost analysis written in December, 2001, by Barbara Ware, an enrolled Senior Actuary at CalPERS. This detailed report was in fact the report required by Gov Code 7507 for the contract amendment in 2002.

  • The costs shown in this report provided a very different story of the estimated annual costs of the increase to 3% at 50. It showed that the costs for fiscal year 2003-2004, or one year after the adoption in 2002, were estimated to be 23.7% of total salary costs or over $805,000. None of this had ever been disclosed to the public.

  • A report of these facts, which appeared to be proof that Gov Code 7507 was violated in 2002 was made to the Council in 2009 with a request for an investigation... Our City Council did nothing.

  • In 2012, a Subcommittee of the Council investigated these facts and unanimously recommended that the Council find that the pension benefit in 2002 was adopted illegally and that the Council should adopt an ordinance declaring that action null and void. Once again our City Council has failed to do anything!

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Last modified: Tuesday, 29-Jan-2013 08:55:38 PST