Guest opinion

Pensions breaking municipal backs
The Opinion of
Marty Richman,
Hollister resident
The relationship between the city of Hollister’s empty public
purse and the Hollister Police Department’s budget generates a new
version of an age-old question,
”
what came first, the city’s financial woes or its enormous
personnel costs?
”
The truth is that the two are closely tied together in a Gordian
knot.
Pensions breaking municipal backs

The Opinion of

Marty Richman,

Hollister resident

The relationship between the city of Hollister’s empty public purse and the Hollister Police Department’s budget generates a new version of an age-old question, “what came first, the city’s financial woes or its enormous personnel costs?” The truth is that the two are closely tied together in a Gordian knot.

If you go to Hollister’s Web site, you will see the following recruitment for a police officer, “Lateral/Academy Graduate Salary: $4,542 – $5,522/mo. + Excellent Benefits.” While $54,500 to $66,200 a year isn’t peanuts, neither will it make the mortgage payments on a $500,000 home, even if you had $100,000 to put down and that is a BIG IF for a new academy graduate. All that said there is more to the story, much more.

Not surprisingly, personnel expenses make up the majority of the police department’s original 2006-2007 budget, but you may not realize just how big that slice is. Of the total $5.9 million annual budget, $4.9 million, or 83 percent, goes to personnel costs. However, only about half of the $4.9 million, $2.5 million, goes for regular salaries. An additional $1 million goes to retirement funding! For every dollar in regular salaries, the citizens are paying 43 cents into the public safety retirement plans, 17 cents for health insurance, and 19 cents for overtime and “other compensation”; all together this adds 80 cents of direct benefits/pay to each “regular” salary dollar. Well, the ad does say “Excellent Benefits.”

Throughout much of California, sworn officers and firefighters have negotiated – and the political entities have accepted – the mother of all retirement plans; it’s called “3 at 50.” At age 50 a retiring police officer or firefighter is entitled to 3 percent of their pay times their total years of service – for life. Thirty years service gets you 90 percent (the current maximum) and you only need five years to qualify for the minimum 15 percent!

Those facts answer the questions about the police department’s exploding budget; the majority of the increases went to retirement funding. In 2003-04 retirement funding was only $221,000, which equaled 12 percent of regular salaries.  In 2004-05 it was 34 percent; in 2005-06 it was more than 43 percent; and it stays that way through 2007-08. As a percent of regular salary, retirement funding more than tripled in only 2 years; in dollars it went up 490 percent.  Even those $1 million a year in retirement funding hardly covers the projected costs. Hollister’s “unfunded actuarial accrued liability” for police (sorry, that is what the real policy wonks named it) is more than $100 million; the firefighters’ fund is in the same boat! Unlike the federal government, the city does not own the printing press at the mint, so someone will have to pay the bill – eventually.

I tried to obtain the funding status from the city in “today’s dollars.”  I was told those numbers are not available (probably too many zeros for the system to handle). Those retirement benefits alone are easily worth a million dollars to each full career officer in today’s funds, half a million, inflation adjusted. Cities are also engaged in a bidding war for police personnel, selling tomorrow’s prosperity for today’s services. That’s why a San Jose officer with an $89,000 a year base salary ends up making more than $170,000. Small cities within driving distance of big cities simply cannot compete on this basis and they should not try.

A large portion of the million dollars a year Hollister currently puts into the police retirement fund would be much better spent in raising the salaries of the recruits and rank and file so that they could afford a better life today; retirement benefits should be reduced accordingly. This change has the added benefit of not obligating future generations for the life-long retirement of a 50-year old. However, don’t count on the unions agreeing to this change. The current system protects those at the top most of all and they are not about to give up their goodies.  It also protects the politicians because the bills only come due long after they are out of office.    

Unfortunately, the criminals have put us in a position where we cannot afford to be without a well-staffed police department. Meanwhile the unions and the politicians have both put us in a position where we can’t afford what we need for the public’s safety. Only a major change will save the system.