CITY HALL — Already grappling with an annual employee pension tab of more than $20 million, Glendale officials have been bracing for the bill to balloon.
But a recent state forecast is even pricier than feared, officials said.
Over the next four years, Glendale can expect to pay more than $135 million into the California Public Employees Retirement System, according to an analysis of forecasted rates listed in the city’s most recent annual financial report.
“We knew the rates were going to go up,” Finance Director Bob Elliot told the City Council last fall. “They are just higher than we anticipated.”
The increase is fueled by major investment losses at CalPERS in recent years, and the increases in benefits and salaries that the City Council approved during a stock market boom that meant little or no contribution to the state system.
Glendale — which has already seen pension payments on behalf of city employees add up to more than $100 million in the last five years — is not alone.
Local governments statewide have seen their forecasted rates skyrocket as CalPERS struggles to backfill its losses. In fact, Glendale will fare better than others across California that don’t require employee contributions, or also pay for retirees’ health-care benefits.
And last year, the Glendale City Council approved landmark two-tier retirement systems with reduced benefits for new hires in the city’s fire, management and general employee unions, which officials say will make future pension obligations more sustainable.
“I think that Glendale has been more aggressive, in my analysis, than any city I know of,” said Councilwoman Laura Friedman.
But that won’t make paying the looming pension bills much easier.
“We are doing what we can to address it,” Elliot said. “But that doesn’t diminish the fact it’s going to be a huge hurdle that we have to get over. And there will be impacts to the services we provide.”
The skyrocketing pension costs come as the local economy continues to struggle.
With revenues — ranging from sales and property tax returns to construction-related permits and other fees — remaining low, Glendale officials are bracing for a General Fund budget deficit of roughly $10 million next year. Finance officials say increased pension costs make up about a third of that gap.
It will be the fourth year in a row that the City Council is forced to fill a significant budget gap. Past years have resulted in the slashing of more than 100 city positions, with dozens more kept vacant in an ongoing hiring freeze.
In turn, city officials say they will once again return to the bargaining table this year to ask employees to pick up a greater share of the rising pension costs.
“Our theme is going to be, ‘How do we maintain existing levels of services at less cost?’” said City Manager Jim Starbird. “How can we reduce our direct costs of employee services?”
Glendale employees already contribute between 8.5% and 11% of every paycheck to the state system.
“I know that I’m probably putting in more to my retirement than most other firefighters in the state,” said fire Capt. Chris Stavros, president of the Glendale Firefighters Assn. “To me, we’ve been pretty responsible in this city with how we’ve handled it.”
Still, both Stavros and Dave Cole, president of the Glendale Management Assn., said their unions will again be willing to negotiate as the city continues to grapple with the protracted recession.
“It’s no fun to take a pay cut, but it’s sure better than losing your job,” Cole said.
Representatives for the Glendale City Employees Assn. — the largest union — and Glendale Police Officers Assn. could not be reached for comment.
More concessions will likely be a tough sell with the Glendale City Employees Assn., which had to swallow a 1.5% salary cut and scaled-down benefits for new hires after the City Council last year voted to end an impasse and impose a new contract.
But pension experts say significant employee concessions will be essential to helping cities dig out of the pension hole without decimating services — especially in the years before the economy turns around.
Stanford University professor Joe Nation, who has studied statewide pension obligations extensively, said there will be no easy way out.
“The way to solve the problem is to assess it, understand the magnitude of it, sit down with the stakeholders and then figure out a way collectively out of it,” he said.