More than 100 local governments seek tax hikes to meet rising pension bills

Nine months after a League of California Cities report warned that pension costs were increasingly unsustainable, more than 100 local governments in the Golden State are asking voters for tax hikes on Nov. 6 – which Bond Buyer says is nearly double the record of 56 set in November 2016.

The Nov. 6 measures are on top of 36 city and county taxes that went before voters in the June 2018 primary.

Historically, local hikes in sales and hotel taxes are approved at least 60 percent of the time in California. They’re generally linked to a specific local need – not growing labor costs. With CalPERS’ bills to local governments on track to double from 2015 to 2025, such claims would seem dubious this election year.

Nevertheless – aware that voters likely would be cool to the idea of raising taxes to pay for pensions far more generous than those in the private sector – even now, many local elected leaders depict the hikes as necessary to pay for public safety or for fixing potholes and longer library hours.

Local officials assert hikes are about adding services

In the lead-up to the June primary, virtually the entire city leadership ranks in Chula Vista campaigned for a half-cent sales tax hike on the grounds that it was crucial to adding dozens of badly needed police officers and firefighters.

The tactic worked as Chula Vistans backed the increase. But city leaders’ claims of a coming public-safety hiring spree were impossible to square with the numbers from the city’s budget office. In April, it warned of “bleak” times ahead for San Diego County’s second-largest city, including an annual structural deficit that could reach $26.6 million by 2023 – with surging pension bills mostly to blame.

In Santa Ana, where voters are being asked to raise sales taxes by 1.5 percentage points on Nov. 6, the campaign for the tax hike rarely mentions pension costs.

But once again, a city bureaucrat framed the tax hike in more candid fashion.

“We’re not immune to the labor cost increases that are occurring throughout the state of California and throughout the country. We need to be able to provide additional services to the community. The question before the voters is what level of services do they want from their government?” Jorge Garcia, a top aide in the Santa Ana city manager’s office, told Bond Buyer.

Santa Ana’s pension bill is expected to go from $45.1 million in 2017-2018 to $81.2 million by 2022-2023 – an 80 percent increase.

‘The cause of this point-blank is CalPERS’

But some politicians have no patience with misleading narratives. “The cause of this point-blank is CalPERS and our pension fund,” Lodi Councilwoman JoAnne Mounce said in June when the Lodi City Council decided to put a half-cent sales tax on the Nov. 6 ballot.

As the League of California Cities reported in January, “With local pension costs outstripping revenue growth, many cites face difficult choices that will be compounded in the next recession. Under current law, cities have two choices – attempt to increase revenue or reduce services.”

The severity of the pension crisis is illustrated by the fact that it is sharply worsening in a period in which there is often seemingly good news on the fiscal front.

State revenue is expected to go up in 2018-19 for a 10th straight year.

County assessors report a 6.5 percent increase in property taxes this year. That’s triple the rate of inflation and comes even with Proposition 13 preventing increases of more than 2 percent on homes, businesses and other properties that didn’t change hands.

In July, CalPERS announced a second straight year of above-average earnings on its investment portfolio, which rose in value to $357 billion.

This prompted a news release from a top state union leader disputing talk of CalPERS’ poor health.

“While it’s important not to focus on one-year returns, these returns continue the long-term trend of CalPERS performing above or near its long-term discount rates and once again defying the sky-is-falling predictions of system critics,” wrote Dave Low, executive director of the California School Employees Association.

But despite the good returns, as of July, CalPERS only had 71 percent of funds needed to pay for its long-term financial liabilities, the Sacramento Bee reported. That’s far below the 80 percent funding level that is considered the absolute minimum for a healthy pension system.

24 comments

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  1. Dude McCool
    Dude McCool 29 October, 2018, 10:04

    No. How does “No” sound? You don’t like that answer? TOUGH SCHIFF!!!

    Reply this comment
    • Jerri
      Jerri 30 October, 2018, 18:17

      It’s harder than it should be. We had enough concerned residents push back on a sales tax or parcel tax that our council majority wanted to put before the voters. We informed residents recognized the pension issue but said control costs–our city has been deficit spending. In effect, we “forced” a reorganization and 10% cut in department spending. The result–public safety unions using social media to let us know safety is compromised, to city council members, etc. My reaction has been to post factual data on what is going on, what TransparentCalifornia data shows “we” pay for public safety, the median household income for our city, etc. It’s amazing what a handful of informed residents can do when armed with real data.

      Reply this comment
  2. Fubar N Wass
    Fubar N Wass 30 October, 2018, 08:59

    In the SF Bay Area, the Metropolitan Transportation Commission (MTC) is proposing diverting local government property tax revenue to MTC’s CASA project.

    Reply this comment
  3. Ronald Stein
    Ronald Stein 30 October, 2018, 10:03

    It’s frustrating and appalling that the “courts” are actually saying that future generations will continue to be legally responsible for DEFINED BENEFITS established by previous generations! Are the courts really supporting taxation on younger generations without representation?

    The general public’s concerns about those that are under-compensated and entitled to retirements may be valid concerns, but life is not fair. Their beliefs are now imbedded onto their children, who are unable to vote today, who will bear the costs of many enacted “Defined retirement benefit” pension programs. These folks have no empathy for their children and for future generations who did not vote for these programs, but will bear the taxation on them to fund generous programs elected by their elders.

    There may be some similarities with other inter-generational inequities, but the younger generations will at some time participate in Social Security and Medicare, but they will NEVER participate in the defined benefit pensions for their elders that they must bear the funding responsibilities.

    It’s time for a lawsuit that claims inter-generational inequity on financing “defined retirement benefit” pensions is unconstitutional. How can a judge claim that promises made by elected officials that require youths who have no voting power to pay those promises is fair???

    Reply this comment
    • Sean
      Sean 30 October, 2018, 14:24

      You people have been tapped pretty severely over the last 30 years and even more so recently. They are forced to pay more for college as Medicaid takes a larger portion of state budgets. Their health insurance is more expensive to keep premiums low for older people still working as well as make up for deficits in Medicare and Medicaid reimbursements. Their kids go to overcrowded schools because 20% of the operational school budget is scheduled to go to CalPERS next year. They pay exhorbitant rents because incumbent owners use use extensive legal tools to block housing development. Honestly, they can stay and suffer with a perpetual promise of relief that will never come or they can leave for greener pastures where housing is less expensive, with better schools and easier commutes. Many do and the exodus of the young and less affluent to other states will likely continue.

      Reply this comment
    • Mookie
      Mookie 30 October, 2018, 18:29

      The judges wish , as they are Union moochers also.

      Reply this comment
    • Humble Gardener
      Humble Gardener 1 November, 2018, 12:01

      That is not correct if cities declare bankruptcy and are forced to reorganize and trim promised benefits in FEDERAL bankruptcy court. The bankruptcy judge in Detroit’s bankruptcy dispelled the myth that state constitutions that require taxpayers to fund whatever amount has been promised. Pensioners current and future all took a big financial haircut, and there was nothing state legislators, the governor, CalPERS attorneys (they were an interested party in the ruling, for obvious reasons) or anyone else could do about it.

      Public employee unions will eventually be shown to have been too greedy, and they will lose it all.

      Reply this comment
      • Bryan M
        Bryan M 5 November, 2018, 08:51

        Absolutely right, and I The ridiculous perk of. Ring able to retire at 50 or 55 just ups the persons taking early retirement, only to go back to work for other Cities for a 2Nd pensions to double dip greedy moves….should be a 30 year vesting to get maybe 50% pension , and not spiked in last 5-10 years rate, more a weighted average of say 2/3 into retirement vesting wage.
        It has been so greedy by Unions and Employees in CalPERS- I say renegotiate contracts back to 65 retirement age or let the Cities file Bankruptcy to flush those bad contracts out. let them collapse on their own selfish foundations- just Pyramid schemes anyway- no future generations can support their greedy structures.

        Reply this comment
  4. Bear
    Bear 30 October, 2018, 17:39

    real simple way is to stop paying for all the ILLEGALS getting free stuff that u and i are allowed to get. Thats 15 million plus dollars that can used for the American Citizens.

    Reply this comment
  5. Rick
    Rick 31 October, 2018, 12:34

    There is a solution to every problem, but those in power don’t want to lose that power. First we need to stop the pensions and convert to 401k or Social Security. Then we need to stop the unions from ripping off the public by getting rid of them – they have no place stealing from the public when the public has no voice. Then outlaw lobbying and the corruption. Then get rid of old regulations put in place to satisfy special interests and create new regulations that protect the public and the workers. Then stop allowing dependent illegals from entering and staying in our country. We might be able to do this by broadcasting that Schumer, Obama, Clinton, and all the other progressives open their doors to their mansions 24 hours a day to any and all illegals to come and go as they please to show their approval of the same thing for our country.

    Reply this comment
  6. SoCalPal
    SoCalPal 31 October, 2018, 13:42

    Unfortunately, This economic fiasco is way beyond of the comprehension level of the average California voter.
    They’ll just keep voting yes on every bond issue put before them if it just includes “for the children”.
    The future will be pretty scary for the average homeowner in our fair State.

    Reply this comment
    • Gigi
      Gigi 31 October, 2018, 14:39

      Yes indeed, the voters are brain washed by teachers, Unions and our”dear” progressive Media
      While the majority of California tax payers (90%) will never enjoy the exorbitant pensions and benefits of Union members, they are tricked each time in voting “for the children “ Unfortunately most of the money goes towards Unions lifetime pensions

      Reply this comment
      • Not.A.Liberal
        Not.A.Liberal 3 November, 2018, 22:52

        The vast majority of the CA electorate is either too afraid or too lazy to be informed. They spend more time maximizing entertainment over responsibility.

        Reply this comment
  7. AC Inoc
    AC Inoc 31 October, 2018, 16:31

    Go back to a volunteer fire department. Cut all the bull s**t and pensions. These are the most over compensated public employees of all. You will have zero problem finding volunteers to do every aspect of this department.

    Reply this comment
  8. Smokey
    Smokey 31 October, 2018, 20:27

    Politicians promised OUR future tax money… in return for a big block of votes from a special interest group: the public employee unions.

    The unions delivered — and they got their huge pensions — at OUR expense. But now some of those politicians are retired, leaving the taxpaying public holding the bag.

    Now the chickens are coming home to roost.

    What should the taxpaying public do about it?

    Answer: Vote YES on Prop. 6! The electeds won’t admit it, but the primary reason they’re against Prop 6 is because they NEED that money to pay the exorbitant state worker pensions that they promised.

    But even with the recent gas tax (which Prop 6 would rescind), there’s not nearly enough money to pay the pensions they promised state bureaucrats.

    Vote YES on Prop 6 anyway — it will be amusing to watch the electeds being forced to CUT spending for a change!

    If we don’t pass Prop 6… then we’re just chumps. They made their bed, they need to lie in it.

    Don’t be a chump! Vote YES on Prop 6.

    Let’s put that gas tax money into OUR pockets for a change, instead of letting these electeds take MORE money OUT of our pockets!

    It’s THEIR problem! Let them deal with it. We’re not their chumps… are we?

    Reply this comment
  9. Johnny
    Johnny 31 October, 2018, 20:36

    The problem with this state is that it should of fixed the pension problem 10 years ago and made all the civil servants pay for their own retirements. The taxpayers are paying for their wages,retirements,healthcare and they don’t pay a dime for the private sector people that actually work and generate money. The waste in this state is out of control. Until people take back this state there is no end in sight for stopping the lack of brains in this Government.

    Reply this comment
    • Humble Gardener
      Humble Gardener 2 November, 2018, 10:33

      Very true, but as they say, the best time to plant a tree is 20 years ago. The second best time to plant a tree is today.

      Reply this comment
  10. Dick Cabaza
    Dick Cabaza 31 October, 2018, 20:40

    In LA County and City,firemen retire with and AVERAGE annual pension payment of $164500.Police average is roughly $147,000.Secretaties at the Port of L.A. went strike a couple of ears back claiming an average salary at that time of $102,000 was not sufficient to live on.THe strike lasted 3 days and the City acquiesced to their demands which was for an immediate 20% increase in wages.This does not include the golden parachute of goodies that come with this large endowment like no deductible full medical coverage for the poor starving civil servant AND his dependents. Lest we think this is also ok.The dependents can include the second or third wife that 40 years younger than our poor deprived civil servant.In that case the City would be on the hook for all pension payments and health insurance until the person was to die, which could be 30-40 years after the poor civil servant passed on to the pearly gates. I’m positive when I get to heaven and look around there will be two sections, one for the poor peons like me and one with flat screens, two story mansions and guard gated entrances.

    Reply this comment
    • ricky65
      ricky65 3 November, 2018, 06:56

      Those retirements are insane. I fear our public servants have become our public masters.

      Reply this comment
    • Bryan M
      Bryan M 5 November, 2018, 08:59

      Yes Dick C- should be restricted to same aged wife not some Young wife or kept man husband looking for a meal ticket for their lifetime as well- this CalPERS is so out of Control – just let them fail in Bankruptcy under their own greed…

      Reply this comment
  11. Sharon
    Sharon 1 November, 2018, 13:57

    What about negotiations of new construction of these Indian casinos? I wish they would get more money from these investirs as we need more public safety after they open the doors.

    Reply this comment
  12. Ken Churchill
    Ken Churchill 6 November, 2018, 07:56

    The problem we are facing today began in 1999 when CalPERS told the state legislature that pension increases of 50% retroactively back to the date people were hired would pay for themselves with investment returns. What they did not anticipate though they should have is that the new benefits would double the number of retirees each year because they would retire at younger ages.

    This fraud worked so well that CalPERS then went to every city and county in the state and sold them on the idea. Records show that CalPERS gave the agencies three options to value their assets. For Pacific Grove they told the cost of increasing pensions for safety employees was 25% of salary using current asset values but that the city if they used inflated asset values could tell the City Council the cost would be 2% of salary. So what numbers do you think staff showed the City Council?

    The big problem that needs to be solved is we have people who benefit from the system running the system.

    Reply this comment

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Chris Reed

Chris Reed

Chris Reed is a regular contributor to Cal Watchdog. Reed is an editorial writer for U-T San Diego. Before joining the U-T in July 2005, he was the opinion-page columns editor and wrote the featured weekly Unspin column for The Orange County Register. Reed was on the national board of the Association of Opinion Page Editors from 2003-2005. From 2000 to 2005, Reed made more than 100 appearances as a featured news analyst on Los Angeles-area National Public Radio affiliate KPCC-FM. From 1990 to 1998, Reed was an editor, metro columnist and film critic at the Inland Valley Daily Bulletin in Ontario. Reed has a political science degree from the University of Hawaii (Hilo campus), where he edited the student newspaper, the Vulcan News, his senior year. He is on Twitter: @chrisreed99.

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