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Santa Barbara’s Two-Tier Pension Program Set to Kick In

By Giana Magnoli, Noozhawk Staff Writer | @magnoli |

Under a new state law, the City of Santa Barbara will have a two-tier benefits program with smaller retirement payouts for employees hired after Jan. 1.

The legislation, Assembly Bill 340, will raise the retirement age and lower the California Public Employees’ Retirement System payouts for new employees. Benefits will be calculated using an average of someone’s three highest years of compensation instead of the single-highest year, to prevent “spiking” payouts.

The move comes as many jurisdictions have already implemented or tried to implement a two-tier system. Agencies have been addressing pension reform in a “hodgepodge” way, according to employee relations manager Kristy Schmidt, so the act is a good solution to the need for a two-tier system.

Santa Barbara has $267 million in unfunded pension liabilities, and the new law does nothing to forgive those, she added.

Currently, safety employees earn 3 percent of their highest year’s salary for each year of service and can retire at age 50. If they have 30 years of service, for example, they can earn 90 percent of their highest-ever compensation, including special pays.

New hires will be offered 2 percent at 50 years old or 2.7 percent if they wait to retire until age 57.

Non-safety employees earn 2.7 percent at age 55; new hires will be able to earn 1 percent at 52, 2 percent at age 62 or a maximum of 2.5 percent if they retire at age 67.

These plans are “significantly a less generous benefit” than the current plans, Schmidt told the Santa Barbara City Council this week.

Employees will still be able to include special pays and some other benefits in their compensation, but CalPERS will now cap compensation considered for pensions at $132,120.

The city’s pension fund was “superfunded” in the late 1990s but is now unfunded by $267.8 million, or about 38 percent, out of $700 million. Finance Director Bob Samario said it is likely to take 20 to 30 years to make up those losses.

A big piece of that came from the retroactive raises when public safety employees were changed from a 2 percent at age 50 to 3 percent at 50 formula, which increased pension payouts, according to City Administrator Jim Armstrong said.

In a presentation to the Finance Committee, Samario said the city paid $75.5 million in base salaries, $1.8 million in special pays and $5.7 million in overtime for the last fiscal year.

Click here for more information about labor group agreements with the city and specific compensation data.

Noozhawk staff writer Giana Magnoli can be reached at .(JavaScript must be enabled to view this email address). Follow Noozhawk on Twitter: @noozhawk, @NoozhawkNews and @NoozhawkBiz. Connect with Noozhawk on Facebook.

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» on 10.18.12 @ 08:57 PM

20-30 years to “make up losses” based on “superfunding” in the late 90’s? We have a $268 million pension liability growing at 10.5%/year. We can’t compensate for planning based on the 25% earnings of the late 90’s when we can’t anticipate earnings > 2%. 52% of SB’s budget is spent on current pension expense, and that percentage doesn’t include medical insurance or other health care expenses, only pension payments. It’s difficult to rationalize the costs involved in developing this plan.

» on 10.19.12 @ 02:42 AM

No doubt some government workers (especially Safety) were getting too much milk, but Wall Street without proper regulation and a bought up Congress without a conscience has caused this mess for the middle class.  See the videos of Building 7 at the World Trade Center coming down (YouTube) and realize that some evil folks are in charge of our lives with no chance of voting them out. 

Unless there are some heroic organizers out there that can turn the world around for all humans to share in the future?  Tax the Wall Street gamblers to make up for the fallen economy, stop the endless wars, and prevent foreign manipulations of our government.

» on 10.19.12 @ 05:39 PM

allowing anyone to have any option of a paid retirement at age 50 is unsustainable - there simply is not enough money to pay out these benefits.  Most people are at their most productive in their 50’s and the last benefit the city needs to offer is retirement before 65.

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