The "defined benefit" retirement system was phased out of private businesses decades ago in favor of 401k and similar 'defined contribution' systems. Government needs to do the same. Then if someone decides to retire at age 50, it's their own decision on how to spread out their retirement nest egg over expected lifetime. No double-dipping problem, either.

Yet the council has allowed the city manager, James Keene, swell his administrative ranks with one new hire after another, with what appear to be relatively high salaries. I'm not talking librarians here. Is no one looking ahead to the future retirement and health benefit costs if these hires stay until they can take early retirement? Especially as it is rare for employees to be fired in government (and educational) bureaucracies.

There are no rainbows, butterflies, etc., that are going to make this all work. I couldn't believe that the city was going to give salary increases again when there are such negative implications on the pension fund. Private industry absolutely does not offer these kinds of benefits any more. PLEASE TAKE STEPS TO MAKE PENSIONS FALL INTO LINE WITH WHAT CAN BE SUPPORTED BY THEIR FUNDING!!!

Great piece, Mr. Thorwaldson. Love the butterfly analogy!

And then there's pension spiking, the tactic of pushing all your unused vacation and sick leave to boost your pay towards the end of your tenure, thereby multiplying your retirement pay by a big factor.

Why is retirement pay based on compensation in the final year(s) of service?
Much of it was earned at lower salaries.

I would totally support a citywide shutdown to negotiate a switch to defined contribution with the unions. Of course, managers are not going to let that happen. They are on the same defined benefit plans.

Only the city council can make this change. And the citizens have to back them fully.

To Mr. Pepperdine,
Do some research before you write. In Palo Alto, your pension is calculated by your base pay only, for the last 3 years of your employment. Not overtime. Not sick leave. Not vacation. There is no payout for sick leave in Palo Alto and a employee can only keep 3 years of vacation on the books. So if you make $100,000.00 per year and you have 30 years with the city and are age 55, you can retire with $90,00.00 pension per year plus medical.

That should be $90,000.00 retirement.

Has there been any thought to putting all employees on Social Security??

I found a pdf response to the Grand Jury from the then Palo Alto mayor, Yiaway Yeh, regarding Palo Alto's approach to pension and retiree medical liabilities which was very enlightening:

Web Link

Palo Alto has clearly tried to address these issues, within the many limitations imposed by CALPERS and the CA legislature. There are still many issues to be debated but it does shine a light on what Palo Alto has done and can do.

One way to minimize future pensions would be to give more bonuses, that would not count towards future pensions, rather than the excessive permanent raises the city staff prefers.

Thank you, Mr. Thorwaldson, for your important piece.

Unfunded Pension Liabilities are not that complicated and too many people assume it is like counting butterflies. We got to where we are because of too much apathy and too much short-term focus - voter apathy and everyone in government (at every level) has a very limited time range focus because the people we vote for know they will be gone before the bs hits the fan. The big changes that are needed must come from the State level- Arnold Schwarzenegger took a stab and pension reform but we voted down his initiatives. Some people want to blame unions but it is the people we vote for who give away the money. Far too often our leaders use the excuse "we had to do it because some other town did it". Just this week the PA Council announced it had to raise it's own salaries because Sunnyvale was paying more - frankly the salary does not bother me but the fact that they did not discuss their pension and medical benefits does matter. Pension reform should start at the top - City Councils should not get lifetime pensions and lifetime medical benefits. Below the City Council we have allowed too much city government growth - aside from police, fire and public works the great majority of us could get by with half (or even much less) of the "services" being offered by the city.

This post by Jay T. is a breath of fresh air, because it deals with reality...not fantasy. Palo Alto has long been about denial of reality. That's what having a lot of money can do...until the money starts running out.

Thank you, Jay.

Congratulations Jay on your swollen pension/benefit piece. This problem is widespread and no politician or"czar" is willing and able to deal with it.

The Affordable Care Act brings new urgency. What is rapidly evolving a large class of the medical insurance poor, maybe 95%, and a new aristocracy with cheap, gold-plated medical benefits.These aristocrats will be at the head of a very long line trying to get affordable care. The solution? Single payer, uniform benefit insurance paid for by a percentage of income from EVERYONE. Yes, even our public servants.