TK Arnold: Retirement vs. Reality

by Thomas K. Arnold on May 26, 2010

Head Bonk 5-1I found it ironic that the day after the Carlsbad City Council imposed a realistic new contract on the city’s Firefighters Association, newspaper headlines up and down the state announced that the board of the California Public Employees Retirement System was asking the state for an additional $600 million handout to help pay for public employee retirement benefits next year.

The request (which was subsequently “delayed,” according to news reports, due to concerns about the state’s own financial viability) underscores the need for dramatic pension reform. Simply put, the overly generous benefits cities gave their employees in the early 2000s are unsustainable. We can’t afford to let our public safety employees retire at 50 and receive pensions as high as 90 percent of their peak-year salaries. But the unions that represent these workers have steadfastly refused to accept reality and renegotiate their contracts —- leading to two possible outcomes.
Outcome No. 1: The cities ultimately go bankrupt, as we saw happen in 2008 in the Northern California city of Vallejo. The bankruptcy filing allowed the city to void its crushing union contracts in order to reorganize, and earlier this year Vallejo leaders cut a new deal with their firefighters that reduced pension benefits by one-third.

Outcome No. 2: City councils can show courage and leadership, as Carlsbad’s did, and cut benefits before the you-know-what hits the fan. The Carlsbad Firefighters Association had ample time to present a counteroffer, and perhaps the city would have struck some sort of a compromise. But the union refused to budge, prompting the City Council to declare an impasse, terminate negotiations and impose a new contract that, quite frankly, should be a model for cities all over the state, if not the country.

The new contract, subject to a public vote in November, contains a two-tiered retirement system with lower benefits for new employees. Firefighters hired after Oct. 4 can still retire at age 50, but their annual payouts will only be 2 percent of their highest salary times the number of years they worked for the city, not 3 percent, as firefighters currently get. Additionally, the city will no longer pay the lion’s share of the “employee” portion of annual pension contributions. Firefighters will now have to pay their own fair share, just like everybody else in the private sector.

The citizens of Carlsbad should be proud that their council had the fortitude to stand up to the unions and for the taxpayers. Ideally, we’d give our brave firefighters the world —- but in reality we simply can’t afford to keep doling out these huge pensions while ordinary citizens who work in the private sector are losing their homes and their jobs.

Other cities are sure to follow Carlsbad’s lead —- not because they necessarily want to, but because they have to. It’s either that, or follow another city, Vallejo, into bankruptcy.

Thomas K. Arnold can be reached at TKARNOLD@aol.com.

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