The initiative drive sponsored by Citizens for Fair and Responsible Pension Reform carefully avoids two key components of runaway pension costs:
• Public safety benefits would not be covered by the initiative;
• There would not be a change in the defined-benefit design of current pension payouts, which means the city would continue to help fund lifetime pensions at a specific amount no matter what economic hardships come along.
Until CalPERS and all the agencies it serves adopt a defined-contribution plan, there is little hope of reducing the rapidly escalating cost of pension benefits in Menlo Park or in any other public agency that buys into the CalPERS plan. In today's world, few private employers offer costly defined-benefit pensions. Instead, they often match an employee's contribution to a 401(k) plan, and may or may not play a role in managing the funds.
The proposed initiative would reduce pension benefits for new rank and file employees by:
• Raising the retirement age from 55 to 60;
• Returning to the 2007 formula that calculates retirement pay at 2 percent of pay times years of service; that means that after 30 years, a 60-year-old worker could retire at 60 percent of his or her pay averaged over the last three years;
• Prohibiting the city from retroactively applying an increase in pension benefits for any current or new employee receiving benefits.
How much the city would save using the new 2 percent at 60 versus the current 2.7 percent at 55 is not clear. Public safety pensions, now 3 percent at 50 after 30 years — and a major factor in the city's pension costs — would not be affected.
Given the minimal impact of this initiative, it is difficult to say if the council will simply enact the proposal itself or force it to a November vote, where it would almost certainly win, unless the city's unions mount a full-scale attack.
But regardless of what is said during what we expect will be a contentious campaign, the only real way to solve the state's pension crisis is to put pressure on the governor and legislators to get the job done in Sacramento. This is not an issue that can be solved piecemeal, one city at a time.