Sacramento is considering requiring police and firefighters to begin contributing to their pension fund. Such a proposal sounds quite reasonable. All other Sacramento city workers have to contribute to their pension plan. And any worker in the private sector must contribute to the pension plan. So why should police and firefighters be exempt?
But what must be considered in this case is that police and firefighters in Sacramento bargained with the city to have the city pay the employee's share of pension contributions in exchange for pay raises. That means that the city instead of giving pay raises to its public safety officers instead pays for their pension contributions. This was a strategy that cities often agree to because they see it as a cheaper option since they can rely upon market returns on the pension fund to make contribution amounts smaller. While if the city had agreed to pay raises for police and firefighters they would have had to pay that money up front.
So now that there is a little background on why some public employees don't pay, or pay a small percentage, pension contributions, what would it mean then to start making public employees pay their full pension contributions? It would essentially be a pay cut to city workers. Part of Brown's pension plan is to not allow cities to pay for public employee pension contributions, meaning all city workers would have to pay the full employee pension contributions. This would certainly help save the city of Sacramento money. But it should be noted that the city, under this new plan, would still contribute the employer portion of pension contributions.
Looking at public workers though this would certainly be a pay cut. For workers such as firefighters and police, their salaries have stayed relatively the same over the last few years. So by now forcing these public workers to pay 5, 7, or 10 percent of their paycheck to the pension fund, what that means is that the police officer's pay check will be reduced by 5, 7, or 10 percent. That reduction in pay is to pay for and remedy the mismanagement of the pension fund by city officials. And in light of the fact that paychecks have not been rising for public employees, in fact they are falling, this could represent a very significant pay cut.
Though there may be reasonable arguments as to why the city can't be expected to fully fund the pension fund, the way this issue is being presented in the media is very misleading. This is not simply a story about the city trying to get its finances in order, while public employees and their unions act like spoiled children. The story is that the city did not manage its finances well during good economic times, but because of growing stock market returns no one noticed. Now that the stock market is not as robust as it once was, the gaps have opened up, and now city officials are planning to cut public employee pay in order to close those gaps. And these new pay cuts are coming in the form of reneging on promises made for the last few years in exchange for workers not demanding pay raises over the last several years. The city of Sacramento needs to think hard about whether this is a good way to solve these budget gaps? And the media needs to be more up front about why the city funds these pension systems and why workers are upset that they haven't had a pay raise in years and now the city is talking about cutting pay.
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