Sacramento City Manager John Shirey has issued a warning to city employees: more than 100 could lose their jobs unless they start contributing more to their pensions.

Shirey told the City Council on Tuesday night that half the city's budget deficit over the next two years could be eliminated if all city workers paid the employee share of their CalPERS retirement contributions.

Very few rank-and-file workers now pick up the entirety of their pension tabs. Instead, in arrangements that go back years, the city covers some – or all – of those payments.

It's a situation that Shirey said is not sustainable.

"We don't need to do something draconian like wipe out pensions for public employees," Shirey said in an interview. "We simply need to go back to where we once were, to benefits that are affordable and with employees paying a fair share."

Other jurisdictions in the region share Sacramento's predicament.

Regionwide, cities made about $35 million in pension payments during 2010 on behalf of their employees, roughly equivalent to the entire municipal payroll in Folsom, according to new data from the state controller's office. Such payments fell by around 15 percent in the region from 2009 to 2010, partially due to layoffs and partially due to negotiated concessions with public employee unions.

Most rank-and-file workers at City Hall contribute 4 percent of their salaries toward their retirements, with the city picking up the remaining 3 percent of the employee's 7 percent share. This amount does not include the city's employer contributions on their behalf.

In Sacramento, the city has budgeted $14.2 million from its general fund this year for payments made on behalf of employees.

In addition to those contributions, the city has also budgeted $41.5 million in employer contributions toward workers' retirement funds. That means roughly $1 out of every $6 in the general fund – which pays for most basic services – goes toward employee pensions.

Police officers do not pay any of their employee share, an arrangement that goes back decades. City firefighters also don't make payments into CalPERS, but will begin contributing 6 percent in January 2013.

In many cities across the state, councils agreed to pick up employee contributions years ago in lieu of raises. Changing this now-entrenched arrangement has become a focus in Sacramento's budget talks this year.

Shirey said the city's $24.5 million deficit over the next two years could be addressed by simply laying off 240 workers – including 89 cops, 51 firefighters and 22 park workers – but "I don't think that's a very good approach and I'm not recommending it."

Asked if layoffs would be necessary should labor unions decline pension givebacks, Shirey said, "it's pretty much an either-or."

"We don't have to do something severe," he said. "We could manage our issues if employees stepped up and paid their share."

The response to his demands has so far been mixed.

Joan Bryant, the director of public employees for Local 39 – City Hall's largest labor union – said pension changes are "something we will give very serious consideration to. It's not that onerous."

However, Bryant said that public safety officers in particular must also pay their share.

"I don't think that any group should believe that they are special to the point where taxpayers should shelter that burden for them," Bryant said.

Mark Tyndale, head of the city police union, did not return a phone call seeking comment. Police union officials have said in the past they are not interested in renegotiating their contract until it expires next year.

Shirey said he has "not reached any conclusion" on whether the police union will agree to pension changes. While the union has not volunteered to renegotiate its contract, "they've offered to talk with us," Shirey said.

The City Council voted 6-3 last summer to lay off 42 police officers, an unprecedented move that helped fill a $39 million citywide deficit for the current fiscal year. Its refusal to agree to temporary measures such as salary freezes to address the budget gap was seen by many as a signal that the city will seek pension givebacks and other long-term changes that affect the budget.

"I don't think the economy is coming back at the local level anytime soon," said Councilman Jay Schenirer. "The question becomes, how do we get to a stable and sustained budget?"

Bryant and others praised recent changes to the pension arrangements held by top city brass.

Top city management officials – including department heads like the police and fire chiefs – recently agreed to pay their entire employee share toward the California Public Employees' Retirement System. The city's clerk, treasurer and attorney also are making those payments, and Shirey agreed to pay his entire share when he was hired last summer.

The city Compensation Commission recently ordered the mayor and City Council to pick up their employee contributions.

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Call The Bee's Ryan Lillis, (916) 321-1085. Read his City Beat blog at sacbee.com/citybeat. Staff writer Phillip Reese contributed to this report.

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