Menlo Park's Future

 

Should We Be Worried?

Fellow Residents,

The San Jose Mercury News had a “blink and you would miss it” blurb in its July 19th edition (page 3c):

The California Public Employees Retirement System, the largest U.S. pension fund, said it lost 2.4 percent in the 12 months ended June 30, as stock declines caused its worst performance in six years.

The performance of the fund, with $239 billion in assets, compared with 19 percent gain in its previous fiscal year.  Calpers, as the fund is known, said its stock portfolio lost 10.7 percent.

This has relevance to our City’s budget—and future.  Remember in one of my previous emails I wrote about how our Council (by a 4-1 vote) passed a budget that projected deficits for the coming decade.  The majority did so based on their “knock on wood” philosophy that Menlo Park’s public budget has usually done better than projected, and the majority’s hope was that the budget may turn out to be in the black after all.

This portfolio loss may impact such budget optimism:

·         Police benefits were raised over two years ago to what is, in essence, 90% of one’s last, best pay year after 30 years of service.  This is available as early as age 50.

o        In fact, as the latest Almanac wrote, one of our recently retired commanders will be getting at least $124,441 per year for the rest of her life.  This commander was 50 at retirement.

·         A few weeks ago all other employees were given a 35% pension increase in a formula that works out to this: after 25 years of service one can receive 67% of one’s final, best salary; after 30 years of service, one can receive 81% of one’s final, best salary; after 35 years of service, one can receive 95% of one’s final, best salary.  All this is available at age 55.

·         All city pensions are defined benefit. The city supposedly pays Calpers on an as-you-go basis, but if Calpers underperforms, or if the assumptions —such as life-expectancy--- are wrong, the City has to make up the difference from its general fund.

·         Our public work force is aging and many more employees will be reaching retirement age. 

·         We are not immune to macro-economic forces—as the dot-com bust showed; but we are strapped into paying the newly promised benefits for as long as the City shall last.

As always, your comments are welcomed.

Thanks.   Send your comments to menlofuture@gmail.com

Lee Duboc