The Goleta City Council won’t move forward with a second-tier benefit system for the city’s employee health allowance or pension costs, though some council members on Tuesday supported making changes.
Rising pension costs have been an issue across the country, and making changes for new employees would create long-term savings for the city, Administrative Services Director Michelle Greene said at Tuesday’s meeting.
A so-called two-tier system has been spreading throughout the Tri-Counties; of 25 cities surveyed, 10 of them have implemented a two-tier model for pensions, which is twice as many as the same time last year, according to Greene. Cities have raised the retirement formula age and/or lowered the percentage of total compensation that goes into the payout calculation. The overall trend shows employees retiring later than ever, often at age 60 and beyond, she added.
Goleta doesn’t have law enforcement employees, which typically have the highest retirement formula, since it contracts with the Santa Barbara County Sheriff’s Department.
The council already decided to make employees pay the entire 7 percent contribution into their own retirement fund, which will become effective in July 2014, and voted against any other pension system changes on Tuesday, with Councilman Michael Bennett dissenting.
Bennett said he supported the proposed changes and suggested that the city have new employees pay their entire 7 percent pension contribution, change the formula to 2 percent at 60 and use a three-year average to calculate pension payouts.
Forty-four percent of city salaries are below the 75th percentile for the region, so it’s important to keep a desirable benefit package to keep up recruitment and retention, Greene said.
However, her staff proposed some more minor changes to the health allowance and management leave (meant to compensate for unpaid overtime), which council members voted 4-1 against, with Bennett dissenting again.
Goleta pays its 45 employees a $950 monthly allowance for health insurance premiums, and the unused balance can be cashed out. Most other cities in the Tri-Counties have a similar system, since it has better cost control with rising health-care costs, Greene said. Her staff proposed halving that to get savings and still give employees a portion of the unused allowance. The cash-out portion of the allowance concerned a few council members, but not enough to vote for changes.
With so few employees, Councilman Roger Aceves argued that small changes would have a small impact. Having new employees be compensated differently could “cause more morale issues than the money we’re going to save,” he said.
The city pays for 100 percent of all premiums for council members and their families, which could also be considered for reduction or elimination.
Councilwoman Paula Perotte strongly objected.
“It’s really hard to get people to step up to this position unless they’re retired, have a part-time job or work for themselves,” she said.
She said she has relied on the city health plan for herself and her daughter since losing her job because of budget cuts, and wouldn’t feel good about receiving those benefits knowing the next elected wouldn’t be getting the same, she said.
With the votes against changes, the city will continue with its current pension and benefit system, except the change coming in 2014 requiring employees to pay all of their 7 percent employee pension contribution.