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Nose Under the Community Tent

By Paul Losch

About this blog: I was a "corporate brat" growing up and lived in different parts of the country, ending in Houston, Texas for high school. After attending college at UC Davis, and getting an MBA at Harvard, I embarked on a marketing career, mai...  (More)

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PA Employees and Actuarial Matters

Uploaded: Aug 21, 2009
This is a Third Rail Matter, and I understand that as I write this.

The retirement programs that Palo Alto and most other local government entities in California are actuarily unsustainable.

Game theory explains this quite well, and over the last 40 years, the benefits and other compensation very fine municipal employees have received was based on keeping competetive with alternative employers for those they represented, less on accounting for the imperatives in the community they worked for at any present time.

Have things wratcheted up too much?

This is also the model, at least theoretically, in the private sector. Although I perceive the private sector in these parts as being generous when they can be, they also are able to get out of obligations when it detracts from their ability to focus on their core values and mission.

Going forward, what is the right model for CPA employees that attract motivated and high caliber people, and account for the fact that we may need to offer a different compensation and benefits and retirement approach than has been the case in the last few decades?

I will not pass judgement on contracts Palo Alto has had in the past, but I will posit that now is the time to challenge everyone--voters, tax payers, City employees, City management, current City Council Members, and those who aspire to be on City Council.
What is it worth to you?


Posted by Walter_E_Wallis, a resident of ,
on Aug 21, 2009 at 5:28 pm

Walter_E_Wallis is a registered user.

How about fully funded pensions?

Posted by Anna, a resident of ,
on Aug 21, 2009 at 6:01 pm

We need to move Palo Alto employees to a combination Social Security/401k model like the rest of the world has. Police and (maybe) Fire might be excepted from this scheme since their working years are somewhat shortened.

But there's no reason a secretary, a gardener, a City Manager or any of the other positions which have private sector equivalents need to have pensions that allow them to retire in their 50's at close to pre-retirement income with health and other benefits. And besides, as Paul Losch points out, even if there was some theoretical reason to offer defined benefit pensions to city workers, we just can't do it anymore: it is unsustainable.

We could contract with the private sector for a lot (not all of course) of what the city must do to save a lot of money - because private sector firms tend to be more efficient, but also because they're not saddled with pension burdens that municipal workers are.

If the SEIU is going to strike, we should consider that an opportunity to implement the kinds of major changes Paul Losch seems to suggest are necessary.

Will our council members have the fortitude? Probably not based on past performance.

Posted by Walter_E_Wallis, a resident of ,
on Aug 21, 2009 at 11:10 pm

Walter_E_Wallis is a registered user.

Like anyone, employees will take what they can get. It is a management obligation not to make gifts of money that isn't there yet. I won't suggest that council folk set rates in exchange for election support; if it was to get superior management I sure see noo sign they got it.

Posted by annoyed, a resident of ,
on Aug 24, 2009 at 6:19 am

Where was the outrage when the dot-com boom was occuring and city workers were still willing to work under the same conditions they have now? I never read any "woe is me" comments from them while the private sector was making millions. They plugged along knowing they wouldn't be rich but knowing their families would have food on the table and clothes on their back. Now the tables are turned due to an economy that they had no control over, and you people are treating them like villains. I am so disappointed in you Palo Altans. You are acting like spoiled chidren.

Posted by Tim, a resident of ,
on Aug 24, 2009 at 8:51 am

I agree with annoyed!!

These workers were getting 2-3% raises each year and you never heard them crying. Sour grapes you cry babies!

Posted by comprehension, a resident of ,
on Aug 25, 2009 at 9:15 am

Read the comment, the benefits are "actuarily unsustainable.".

It doesn't matter what you thing, Palo Alto cannot afford to maintain the current level of benefits. We need to either reduce benefits or reduce staff.

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