Bell tolls for Beverly Hills
Remember Bell, Calif.? Last year at about this time, Bell made national news upon revelations that its top city officials weren’t just skimming, they were scraping enormous, bloated and obscene top-tier salaries and benefits off the top of the town’s budget.
Bell, however, is far from the only city in the Golden State that’s been paying out big bucks to its officials and employees.
Beverly Hills residents recently learned that many of their city’s 950 municipal and public safety employees were earning stunning wages, 13 weeks of paid vacation, unlimited overtime and other tax-free retirement benefits. Citizen outrage forced city officials into closed-door sessions to figure out how to respond.
These revelations, exposed in a story in The Beverly Hills Courier, unmasked an even deeper problem: many California cities, and likely numerous municipalities across the U.S., are being strangled by the cost of ballooning pension benefits they can no longer afford.
Prior to the Courier’s incendiary story, the city published staff compensation exclusively by “salary,” which reportedly only represents only about half what the City of Beverly Hills pays per employee. Now added to that amount are: guaranteed overtime (city employment agreements with unionized workers includes “guaranteed” overtime), overtime, administrative leave, paid vacation, sick time off (paid if not used), 100 percent retirement contributions (the employee pays nothing), full health care, “9/80” days (every other Monday or Friday off), and legal holidays. Exempt employees get the same amount of sick leave and vacation time, but receive administrative leave instead of overtime pay.
“What we have now is a grab bag of incredible benefits for public employees that are totally detached from what’s been happening in the private sector, and it’s neither fair nor sustainable,” John Mirisch, a first-term Beverly Hills Councilmember told FOX.
In a recent report by the California League of Cities, a statewide advocacy group, a former statistician for the California Public Employee Retirement System (CalPERS), the state’s pension fund, warned that by 2014, local governments could be paying 50 percent of a police officer’s salary, 40 percent of a firefighter’s salary and 25 percent of an employee’s salary for their pensions,
Many cities will face 25 percent or more increases in pension contribution costs in the next three years and those rates are likely to remain high for the next 10 years or more, the report said.
Today, Beverly Hills city employees do not contribute to their own retirement pensions; the city pays everything with half of that contribution being largely tax-free, according to findings from the Beverly Hills Pension Task Force headed by City Treasurer Elliot Finkel, as reported in the Courier. Further, when a city employee retires, he or she is guaranteed a fixed amount that increases every year. If CalPERS funding falls short, the taxpayers are left to make up the difference.
“Where is the cost-cutting, the effort to control expenses on a local level, and the control of how our city is managed?” asked Thomas White, chairman of the Beverly Hills Municipal League, a citizens’ group.
With a population of 34,000, Beverly Hills has one employee for every 34 residents, the highest ratio in California.
Fitch settles with CalPERS
Last Friday, Fox Business Channel reported that Fitch Ratings has settled a lawsuit brought by CalPERS in which the giant pension fund accused the three largest ratings firms of rubber-stamping top ratings on some complex securities.
CalPERS, which claimed it lost $1 billion as a result of the bad ratings, is still suing Moody’s Investors Service and Standard & Poor’s, arguing many of these products should never have been packaged into investment-grade securities.
The lawsuit, filed in 2009, targets “structured investment vehicles” in which an array of loans are packaged and sold to investors. Many of these securities were loaded with subprime loans that soured during the 2008 financial meltdown.
The settlement does not require Fitch to make payments to CalPERS.
