|
In This Issue...
|
|
|
|
|
Central Fire Plans Two-Tiered Pensions
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
BREAKING NEWS - Central Fire Plans Two-Tiered Pensions
First in County to Negotiate Reductions to Public Safety Pensions
By Linda Fridy
The Central Fire Board of Directors decided in July to increase the retirement age for new firefighters and change the time period for pension salary calculations for all new employees.
Those changes will make it the first agency in Santa Cruz County to implement a two-tiered pension program.
The program is referred to as two-tiered because different employees get different benefits. The currently hired or recently retired firefighters will still receive 3 percent of their final salary for every year worked and can retire when they reach age 50.
New employees will not receive the same benefit. While the change does little to reduce the cost of pensions for the moment, as new employees are hired over future decades, the costs will be lowered.
Newly hired Central Fire Chief Jeff Maxwell worked in the Orinda-Moraga Fire District, which made headlines last year for paying out what many termed "excessive" pensions to retirees. There he said he gained an added appreciation for the long-term impacts of pension expenses.
Central Fire provides fire response, planning and emergency medical services to Capitola, Soquel, Live Oak and Santa Cruz Gardens.
While the district has a strong revenue base, it has also been saddled with high pension costs.
Maxwell will be overseeing the first attempt in the county to scale back future retirement costs.
His board voted in July to shift new hires to 3 percent at age 55 and a three-year average for the base retiree salary, compared to current safety employees' retirement plan of 3 percent at 50 with a single-year salary calculation.
Both changes will save the district money over the long term.
A higher retirement age gives the district more time to fund its portion of pensions and less time it must pay them out, and the salary averaging prevents any last-year promotions, raises or special duties from skewing the formula.
Administrative personnel, known as miscellaneous personnel in pension parlance, will keep their 2.5 percent at age 55 formula, but any new employees will shift from a one-year base to three years for determining the "final" salary on which pensions are calculated.
"We're not currently filling any vacancies until this is worked out," said Maxwell.
Move in Response to Exploding Costs
The action came in response to drops in property tax revenue and increases in retirement payment percentages.
Maxwell noted his district has double the number of retirees as current firefighters, which pushes up his district's contribution.
Central is paying 35.64 percent of salaries for firefighters to CalPERS for its safety group, or more than $2 million of its $14.4 million budget.
The cost of paying Social Security is shared between private sector employees and employers and totals just over 16 percent for both retirement and medical retiree benefits.
To aggravate the cost of funding the pension, the increases come as the district's income has dropped.
"This is the first year we took a significant reduction in revenue," he said, explaining that special districts often lag behind in feeling the pinch of lower tax receipts. "We need to adjust our long-term outlook."
The district also has double the number of retirees earning pensions as current employees, which impacts its CalPERS contribution.
The Central Fire board was told by CalPERS that because the change does not impact current employees and therefore does not require any negotiation for concessions, the new system can be put in place in about four months, said Maxwell. That resolution process will include public hearings.
He is optimistic that Central Fire personnel understand the economics behind the change and that he will continue to draw strong applicants.
A recent effort to add to the rolls of paid call firefighters drew 81 local applicants for 15 spots. Paid call does not earn salaries or benefits, just experience and an hourly as-needed wage.
"If people have a calling to help their neighbors and work in their community, this is a great profession," he said.
|
