The Public Eye

The Public Eye: Folsom looks at more golden handshakes

Published: Sunday, Mar. 31, 2013 - 12:00 am | Page 1B
Last Modified: Sunday, Mar. 31, 2013 - 7:11 am

It may invite criticism as public pensions draw increasing scrutiny, but the city of Folsom has become the latest in California to offer a limited number of workers enhanced retirements to save budget dollars.

The Folsom City Council voted 4-0 last week to provide two added years of pension service credit to 31 non-safety middle managers in the California Public Employees' Retirement System, provided they retire between Monday and June 29.

It's unclear how many middle managers will accept the offer. If five do, city officials say, Folsom would see an average savings of about $474,000 for each year the jobs remain vacant.

On the flip side, the city's costs in the form of contributions to CalPERS on behalf of the five workers would increase by a lesser amount: an estimated $16,700 annually, or about $333,600 total over the next 20 years.

The city of Folsom is able to offer golden handshakes under state law, provided it will achieve offsetting savings and no budget increase, CalPERS officials say.

In recent years, retirement credits have been an oft-used tool to help recovery from lopsided budgets.

In 2009, 28 Folsom employees retired under a program similar to one council members set in motion last week. The next year, another 30 Folsom workers retired with service credits.

As a result of those and other measures, Folsom's workforce has declined from 580 to 420 since 2007, said John Spittler, the city's director of human resources.

About five years ago, the city of Woodland offered early retirement incentives to help achieve budget and staff reductions and limit layoffs, according to City Manager Paul Navazio.

The city of Roseville offered it twice in 2010, said spokeswoman Megan MacPherson. And Galt made the offer to two executives in early 2011.

Statewide since October 2011, 33 cities launched early retirement programs as part of budget-cutting efforts, according to CalPERS.

Included on the list are the cities of Lodi, Chico, Ukiah and Willows.

In Folsom, city officials say it's clear that the need to cut spending is not over. A proposed budget for the fiscal year that starts July 1 won't be introduced until later this spring. But an early look at current expenses and the next fiscal year's projected revenues shows a gap of about $1.5 million, said Folsom Finance Director Jim Francis.

So if five workers leave, he said, that will help cut that estimated shortfall by about a third.

Employees in line for the offer are already eligible for retirement, officials say.

"This is not being offered citywide but is focused on our miscellaneous middle-managers," Spittler said. "One of the thoughts here was to create vacancies that would be maintained, usually in positions that are fairly well compensated, and to take those vacancies and use them as a means to reorganize, to flatten the organization."

Spittler said it's extremely unlikely that everyone eligible for the offer will want to retire. Two people so far have expressed interest, he said.

In Folsom, the latest actuarial report from CalPERS shows that based on the market value of the city's assets on June 30, 2011, the city could pay about 65 percent of its promised pension benefits.

That is an improvement over the 58 percent recorded a year earlier, but it still leaves the pool with a $48 million unfunded pension obligation.

Call The Bee's Loretta Kalb, (916) 321-1073. Follow her on Twitter @LorettaSacBee. Read her Report Card blog at http://blogs.sacbee.com/report-card/.

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