First published in the Aug. 13 print issue of the Glendale News-Press.
By Camila Castellanos
The City Council this week voted to accept a weighty report from the Glendale Blue Ribbon Pension Review Committee, which addressed the city’s obligations under the overall public employee pension system’s structure and laid out future anticipated costs and recommendations for rising pension costs.
Though the ad hoc committee outlined wide-ranging recommendations, on which it voted to advance to council by 11-2, councilmembers voted to file the report and continue work sessions to study the complex material, including recommendations. While the council briefly discussed the history of CalPERS, the mistakes made that now severely pressure future budget and city services — and even the remote possibility of “getting out” of the system entirely — councilmembers ultimately resigned to plow ahead to create a best, worst-case scenario.
The city’s pension obligations to the California Public Employee’s Retirement System, known as CalPERS, is one of the biggest financial challenges Glendale — and cities across the state — are facing, with pension costs growing at rates that far outpace growth in general fund revenues and consumer prices. The complex issue goes back to when more generous pensions for city and state employees were signed into law back in about 1999, under a system that was, in retrospect, based on flawed funding projections that led to a warped difference between the system’s overall assets and the value of benefits already accrued, known as unfunded actuarial liability (UAL).
As of June 30, 2020, Glendale had about $2.2 billion in accrued pension liabilities compared to assets of $1.5 billion (market value of assets), resulting in a net UAL of $675.6 million for its citywide miscellaneous and safety pension plans combined.
For the fiscal year 2022-23, Glendale is required to make a UAL payment of about $57.2 million to pay down the citywide UAL.
In addressing what has widely been seen as CalPERS mismanagement, councilmembers woefully retraced some of the missteps leading up to the ballooning deficit.
“I have no love for CalPERS,” said Councilman Ara Najarian. “In 12 years, from 2008-09 to present, they provided a measly return on $440 billion in investments. It’s absolutely unconscionable, inexplicable, as to how that could happen. This year they lost 6%. …What kind of fool loses 6% in this type of market that we’re in?”
Councilman Dan Brotman pointed out that if there is one silver lining to the current pension system conundrum, it’s that the costs will peak in the next decade and then subside.
“This is not an ‘infinite’ problem, we do have a finite problem here that we need to attack,” he said. “Clearly some disastrous decisions were made. … But I don’t think it’s fruitful going over the history. We’re stuck with the commitments we’ve made and we have to deal with them.”
Glendale and many other cities who contract with CalPERS are facing growing pension costs expected to peak in the next decade. The statewide pension reform passed by Gov. Jerry Brown in 2012 lowered the benefits of public employees hired on and after Jan. 1, 2013, which also led to Glendale changing its pension tier system. The city has also worked to reach deals with employee associations so that workers will share some of the costs. Despite mitigations to help curtail pension costs, “more needs to be done,” and there are no “silver bullets” or quick fixes available, as City Manager Roubik Golanian laid out in his introduction to a report summary.
To help tackle the issue, the City Council created the ad hoc pension committee last year. Made up of an initial 15 members, the committee over the course of more than a year has worked to identify and address the long-term pension costs to help mitigate both mid- and long-term impacts to city services.
The committee finished with 13 members, who ultimately recommended, on a vote of 11-2, five major measures to City Council, including a policy to accelerate UAL pay down; file a judicial validation action for issuing pension obligation bonds; establish greater transparency and focus on pension liability in bargaining; restructure Glendale’s collective bargaining program; and pursue increases to employee cost sharing.
To learn more about the Glendale Blue Ribbon Pension Review Committee’s full report, it can be viewed with this meeting’s agenda packet at glendaleca.gov.