Marin County grand jury explains pension crisis

This is an excellent, thorough report explaining the pension crisis facing California municipalities.  While the numbers in the report are specific to Marin, the issues are mostly identical for cities like Encinitas.

Key points:

It’s Worse than You Thought – While a net pension liability of $1 billion may be disturbing, the true economic measure of the obligation is significantly greater than this estimate.

The Thing That Ate My Budget – The annual expense of funding pensions for current and future retirees has risen sharply over the past decade and this trend will continue; for many agencies, it is likely to accelerate over the next five years. This will lead to budgetary squeezes. While virtually every public agency in Marin has unfunded pension obligations, some appear to have adequate resources to meet them, while many do not. We will look at what agencies are currently doing to address the issues and what additional steps they should take.

The Exit Doors are Locked – Although there are no easy solutions, one way to reduce and eliminate unfunded pension liabilities in future years would be transitioning from the current system of defined benefit pension plans to defined contribution pension plans, similar to a 401(k). However, this approach is largely precluded by existing statutes and made impractical by the imposition of termination fees by the pension funds that manage public agency retirement assets. [This last part is a new twist; San Diego has successfully transitioned to a defined contribution plan, but San Diego does not use CalPERS. The grand jury says that CalPERS has veto power over allowing defined contribution plans for new employees of any agency that uses CalPERS, and the CalPERS board would be likely to use that veto. CalPERS is like the Roach Motel -- cities check in, but they don't check out! Governor Brown proposed legislation that would have changed this, but it was killed in the union-dominated legislature].