Pension system needs reformSome readers found it shocking to learn last week that several high-ranking Mountain View employees have retired and then returned to work at high hourly rates, a practice known as "double dipping." But this is only one indicator that the state's pension system is severely out of whack, and must be reformed before more cities are forced to follow Vallejo into bankruptcy.
Luckily, Mountain View is not in such serious financial danger. But over the long term the city could be hard-pressed as more and more employees retire and start collecting 80, 90 or even 100 percent of their highest salary as a lifetime pension. And while PERS, the Public Employee Retirement System, sets most of the rules, cities must make up the difference when PERS investments fall short, as is the case today.
The disclosure that three city department heads would each receive more than $100,000 a year in retirement — with employee services director Kathy Farrar in line for $187,000 a year — shows why neither Mountain View nor any other city can continue to support such high pensions.
To be fair, Farrar spent 38 years with the city, rising to head her department after starting as a junior clerk at age 20. Given that long run, under CalPERS rules she was eligible to receive more than her final salary upon retirement.
But neither the city nor Farrar should be singled out on the "double dipping" charge. In Farrar's case, the city willingly brought her back for a four-month period, according to city manager Kevin Duggan, who says that short-term use of retiring executives is a minor point when it comes to real reform.
Duggan sees the need to reform PERS formulas as being much more important — all the more so as the state's budget woes increase and the burden is shifted back to cities and special districts. In fact, city manager organizations in Santa Clara and San Mateo counties have reached the conclusion that current PERS formulas cannot be sustained, and are ready to work to implement a two-tiered system that would place more of the retirement burden on individual employees.
It won't be easy to change the PERS formulas, especially for public safety employees, who can retire at up to 90 percent of their highest salary after 30 years, regardless of age. A countywide or regional solution is not likely, due to legislators' reluctance to take on the state's strong public employee unions. Instead, each city will have to change its own benefit levels, a move that local employees are sure to oppose. And if the cities do not act at roughly the same time, they risk losing top employees to those jurisdictions still using the old system.
Mountain View already requires some of its employees to contribute to the city's share of their pension payment, a measure that few other cities have adopted. But much more needs to be done here, and at the state level, to close the ever-widening pension gap.