After years of denial, California’s cities are finally waking up to their pension nightmare. Unfortunately, now the crisis is so dire that there are no painless choices left. To keep up with ballooning pension payments, cities soon will have to raise taxes or cut services, or both.
Loudly sounding the alarm, the League of California Cities reported this month that most members expect pension costs to jump by at least 50 percent by 2024-25. Pension payments – now about 11 percent of general fund budgets on average – will eat up about 16 percent by then. That doesn’t include increases in retiree health care costs and other benefits. In extreme cases, the pension burden could lead to more bankruptcy filings like Stockton’s and San Bernardino’s in 2012.
In response, the league is advising cities to consider local tax measures and to negotiate with labor unions to get employees to pay more into their own pensions. That’s easier said than done, of course, especially since local unions are often powerful, well-funded political players.
In Sacramento, for instance, City Hall is negotiating now with the firefighters union on a new contract. The union bankrolled the campaign for Measure U, the half-cent sales tax that voters approved in 2012 to restore public safety services, and likely will also support an expected campaign to renew the tax in November. Mayor Darrell Steinberg is also floating a possible additional half-cent sales tax to help create a fund for economic development, affordable housing and the arts.