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Pensions pinch city purse

Burbank faces high increase in retirement contributions while facing simultaneous budget gap.

March 01, 2011|By Gretchen Meier, gretchen.meier@latimes.com

The rising costs of employee retirement benefits will force Burbank to spend $10.7-million more next fiscal year, bringing the total to $33.5 million, according to city records.

The higher contribution to the California Public Employees’ Retirement System — of which nearly all city employees don’t pay a share — comes at a time when city officials are also projecting an $8.3-million budget gap that will have to be closed before July 1.

“Due to the economy, there comes a certain point where we have to reevaluate how this city pays its pensions,” City Manager Mike Flad said.

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Prior to 1984, all city employees paid a portion of their retirement contributions to CalPERS — typically around 8%. That started to change in the 1990s, as employee unions started negotiating the payments out of their contracts, leaving the city to pick up the full tab. Only members of the International Brotherhood of Electrical Workers — 8% of the city workforce — now pay a portion of their retirement costs.

Labor costs take up 80% of the city budget, Flad said, so a major increase in pension obligations “is a significant financial impact that has to be dealt with.”

A protracted hiring freeze for most vacant positions may not be enough this time, which means layoffs could enter the fray.

Blaming a budget deficit on the rising cost of pensions, however, is pure scapegoating, said CalPERS spokesman Edward Fong.

Merit bonuses — in addition to holiday overtime, second and third shifts for late-night schedules and specialized assignments — can also add to the CalPERS obligation. Last fiscal year alone, the city handed out $1 million in bonuses to employees, adding to their retirement compensation in the long term.

The Burbank Leader filed a lawsuit against City Hall last month for refusing to divulge detailed bonus pay information per employee. Without that information, it’s impossible to know how the bonuses impact the CalPERS burden per employee.

Still, Burbank is among a dwindling pool of cities that cover the entire share of the employee’s retirement contribution, Fong said.

“They are in a significant minority,” he said. “Over the past year or two, it has been seen to be a mini-trend that public agencies have been changing policies due to very challenging economic circumstances.”

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