Tom’s letter is spot on. It should also be noted that when the City decided to sign up with PERS back in 1980, it was considered a “qualified” retirement plan so employees & the City paid into PERS rather than Social Security. Time working for the City no longer counted toward Social Security & as part of that, the City also overlooked paying the Medicare tax. By doing this, many employees who spent their entire career working for the City discovered their Medicare premiums wouldn’t be covered by Social Security when they turned 65 & they would have to pay Medicare premiums out of pocket.

The City seems to always victimize/demonize it’s own employees & retirees then claim they are on the “right track”. Enough of the BS already! The City is the poster child for how to consistently mismanage an organization.

And yes, it does come across that the city keeps using the employees and retirees a bit, as a scapegoat when talking about budget concerns, as this part of the city’s budget gets the most weight, maybe because it is the biggest part of the budget? It was not the employees/retirees who came up with this system, they are just the recipient of the system, so it should not be about demonizing them.

the City never talks about Redevelopment and how it has lost money since the start in 1989.

back in 02 old Hal told me “those Marriot Guys treated us like we were country bumpkins”

I never agreed with the benefits that the City employees received, but the City was Fat with Cash before the start of Redevelopment.

How does the city bypass having their employees paying into Social Security and Medicare? I pay into PERS, Social Security, and Medicare where I work.

Tom, retirees are not being blamed. The workshop was videotaped and is on line. The benefits and Health Care discussion begins at the 2:50 (two hour and 50 min mark). http://slt.granicus.com/MediaPlayer.php?view_id=6&clip_id=690&meta_id=64444

The workshop was a discussion on the City’s 5-Year Financial Forecast, which includes a discussion on the cost of personnel and benefits since those are the largest portion of the City’s budget, which is reasonable since the City provides services delivered by people. However, the cost of public pensions and benefits are rising faster than expenses can be reduced and it must continue to be addressed.

During the workshop, I specifically stated these retirement benefits are specifically NOT the fault of retirees, employees, and surely not the fault of community members who are paying for it. The systems that created these benefits didn’t accurately account for the long-term cost impacts and the costs are impacting all of California residents, and many other states as well.

However, we must remember, this is the public’s money. The public deserves to know where their property taxes and other fees go, how much is collected in those taxes, sales taxes, TOT taxes and other revenues and where they are expended. They have a right and we have a duty to explain the cost of benefits, why they are so expensive and how the costs can be reduced so that the public’s money can be invested in the community’s priorities.

The underlying problem with these benefits is the difference between a defined benefit verses a defined contribution. Public employee pensions (and the City’s Health Plan) are typically written as a benefit the retiree is to receive, without respect to the cost. Which is completely opposite from the private sector where an employee is provided a defined contribution to their pension or 401k – that is, IF they receive a retirement benefit. A defined contribution fixes the cost for the employer to a specific amount, an amount that can be modified year over year based on revenues and expenses. A defined benefit, as public pensions are, results in unfunded liabilities that continue to rise long after the employee has retired. The only lasting solution for public benefits is to reduce the benefit structure and design, eliminate people from the plan, require employees to contribute more, or eliminate the benefit.

In 2010, the City was facing significant deficits. Between 2011 and 2013, the City eliminated many jobs – 65 people no longer work for the City. Some of those people’s lives have been significantly impacted. Although some retired early, some moved out of South Lake Tahoe to find employment elsewhere. The loss of so many jobs should not be brushed aside. The remaining employees have taken pay cuts, have not had a raise in 5 years and they are volunteering many of their personal hours in order to continue to deliver the services to the public.

Pensions:
As stated in the workshop, the costs of public pensions affect everyone in California. All public agencies that are members of CalPERS including the City, STPUD, El Dorado County, state agencies and special districts – all public agencies in CalPERs are in the same boat when it comes to retirement costs. The Government Accounting Standards Board (GASB) has been sounding the alarm on this issue for years.

You are correct, some retirees particularly those who retired many years ago such as yourself, don’t collect a large pension. Pension incomes vary based on the positions held, when someone retired, the benefit plan, salary earned and years in service at all agencies combined. However, some public pensions are over $100,000 and those get a lot of attention from the public. The public, rightly so, doesn’t want to foot the bill for full-salary pensions and pensions over $100,000 a year. The public we serve doesn’t retire early, and the average wage in South Lake Tahoe is far below $100,000. The public expects changes to these systems. Although there are plenty of retirees earning less than $50,000 a year – you are correct about that as well – those earning over $100,000 create a lot of discontent and we are all often grouped into the discussion. Governor Brown signed new legislating capping CalPERs pensions at $100,000, raising retirement ages, and reducing benefits, but most of those changes only affect employees new to the CalPERs system, not current employees. More changes are needed to allow public employers to negotiate for changes to the benefits for current employees.

In 2011, South Lake Tahoe City employees stepped up and agreed to address the impacts of the recession, and agreed to contribute over $1M a year from their paychecks into the pension costs. That is a substantial change, which contributed to reducing the City’s deficit significantly. The pay reductions affected only employees, not retirees.

Retiree Health Benefits:
Where the City of South Lake Tahoe differs than most other public agencies are the Retiree Health Benefits. Only a small percentage of California agencies offer retiree medical benefits. Fewer offer lifetime medical for a retiree and their dependents and even fewer offered the benefits at no contribution to the premium from the retiree or their dependents, which is the City’s plan depending on years of service as you stated.

When these benefits were first offered, the cost of medical care was inexpensive and salaries were low. That is not the case today. As explained during the workshop, the problem is again, NOT the fault of people, but the cost of medical care which we all know has skyrocketed since mid-1980s. Medical care is expensive; the entire nation has been addressing this for years. This is not unique to the City of South Lake Tahoe. A number of retirees and dependents have stated have stated years ago they understood this looming problem.

Where we are at today, is the City’s government sponsored health plan is paid for by the residents of South Lake Tahoe. Therefore, the costs are directly affecting the City’s ability to make the necessary community investments. The City’s plan was a defined benefit (a medical plan), not a defined contribution– that is the primary flaw in the design. Other design flaws are providing the benefit to some, not to others and not capping the costs and various other issues.

The result is that the City’s plan which was once $1,200 a year for a family, it is now $1,500 a month for family (employees and retirees under 65).

No one, absolutely no one, likes this situation. Retirees, employees nor the community. The system is what is broken and a more equitable approach is needed in order to provide some reasonable benefits to current employees, some reasonable and fair solution to others.

Reductions in Costs
The changes made in 2012, (eliminating services, raising the deductibles) combined with the changes implemented in January 2014, reduced the City’s annual cost by about $800,000 or so and reduced the unfunded liability by approx $20 million as calculated by the City’s financial actuarial (Bartel and Associates).

You are correct that the City’s plan did always require those of Medicare eligibility age to use Medicare first. However, that requirement was not previously enforced because some did not have enough Medicare credits (the City did not join Medicare until 2006/07).

Community Investment:
Without the changes to pension and health care benefits made in the past several years, the City would have continued to face substantial deficits draining the reserves. This would have meant the Harrison Avenue project, street improvements, Linear Park improvements and other community investments would not have occurred.

Isn’t it far better that funds have now been invested in the community?

The community deserves the investment, it needs the investment and efforts to grow the economy must be our focus. Our community’s neglected streets and roads need about $2M a year, compared to the few hundred thousand we are spending now, which barely scratches the surface.

The City’s employees and administrators are trying to resolve this problem – and they have been working on it for several years. I commend the employees for tackling this very disappointing situation. Current employees deserve a health plan so they can take care of their families while serving this community. The retirees deserve a benefit, but something equitable. Employees cannot continue to reduce their pay to bear the burden. The community needs the City to invest in itself.

No one is to blame, Tom. You and I have spoken about this a number of times and agree the most vulnerable retirees, those with lower incomes particularly, are in a different situation than retirees with high incomes. No two retirees are alike. Similarly, no two employees or their families are alike.

The City’s Retiree Health Benefit plan as currently designed is a difficult situation, but one that must be corrected. I’m confident we’ll be able to find a solution that is as close to fair and equitable as possible for employees, retirees and the community that is paying for it all.

We need to correct it so that any increases in revenue, from economic growth or new revenue sources, can be directed into the community and community investments, which in turn will grow the economy and provide greater and lasting benefits to the economy, the environment and the people who live here long after we are gone.

~Nancy

Thanks Nancy Kerry for clarifying many of the parts involved in this issue. I hope we can get this solved, at least it’s being talked about, a good first step ;)