May 27 2012

Costa Mesa Stumbles: Cutting Programs, Employees, then Pensions

High cost to exit CalPERS shocks Costa Mesa

According to CalPERS, Costa Mesa’s “termination liability” – the cost to pay off all of its pension obligations as of March 2012 – is $221 million.  This is more than the city expected when it inquired about the exit cost and more than it can pay.

Costa Mesa recently decreased pension benefits for new Miscellaneous employees hired after March 11, 2012 to 2% at 60 from 2.5% at 55.  Safety personnel (including new hires) pensions remain 3% at 50.

The changes followed earlier layoff notices.  The Los Angeles Times reported that notices were sent to 213 of the City’s 472 employees in March, 2011 in a dramatic austerity program being closely watched by other cities struggling with ballooning pension obligations.  The six-month termination notices … cut across departments: firefighters, maintenance workers, jail staff, even dogcatchers.”  Stanford Professor of Public Policy Joe Nation, who researched California’s underfunded public pensions told the Los Angeles Times that, “cities are being forced to look at things that would’ve been unthinkable before.”

The New York Times reported that the Costa Mesa City Council, “moved quickly to approve the outsourcing and layoff plans, [and] says the moves are the only way to solve a budget gap of as much as $15 million next year and to handle pension costs that grow exponentially each year, eating away at the city’s $93 million budget.”  City Council member Wendy Leece said her colleagues were acting “recklessly.”  A year earlier, Costa Mesa had tried a less drastic solution when it “eliminated or reduced the hours for 77 employees and cut programs.”

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