Redlands Pension Costs: Greater Share of Expenditures Than A Decade Ago

Recent decisions by three California cities, including San Bernardino, to seek Chapter 9 bankruptcy protection have focused increased scrutiny on rising public employees' pension costs and the burden they place on local governent finances.

In Redlands, pension costs have increased from 5.27 percent of city expenditures in 2001-2002 to more than 16 percent in 2011-2012, the fiscal year that just ended, according to city data requested by Redlands-Loma Linda Patch. The figures are listed at the end of this report.

Rising pension costs are not the sole reason the San Bernardino city council has approved filing for bankruptcy, but they are part of the picture.

A 45-page San Bernardino budget analysis earlier this month stated retirement costs were 9 percent of the general fund in 2006-2007, they grew to 13 percent last year, and they are expected to be 15 percent in fiscal 2015-2016.

"Retirement costs in Stockton, which filed for bankruptcy on June 28, are about 17.5 percent of the general fund," Capitol Weekly in Sacramento reported recently. "Retirement costs in San Jose and San Diego, where voters approved major pension cuts last month, are 20 percent of the general fund."

Many agencies in California are experiencing increases in pension costs due to the challenging economy, Redlands Assistant Finance Director Thomas Steele said Friday.

"We are a member of the CalPERS system," Steele said. "There are other retirement systems similar to CalPERS, for specific counties such as San Diego County, San Bernardino County, and Los Angeles County.

"Each of those retirement systems has their own set of rules and restrictions that dictate what can be included in an individual's retirement calculation," Steele said. "What I've seen is CalPERS is more restrictive than what I see with some of these other retirement programs."

CalPERS is a long-term investor, Robert Udall Glazier, deputy executive officer of external affairs for the California Public Employees' Retirement System said in a recent editorial.

"As a long-term investor, we fully expect a range of possible returns every year," Glazier said. "Occasionally returns will be negative, and occasionally returns will be wildly high, such as last year's 21.7 percent gain. This year, based on poor market conditions, we expected returns of around 1 percent, and that's what we earned just shy of our 1.7 percent benchmark goal.

"Historically, CalPERS has regularly outperformed our long-term 7.5 percent goal over a 20-year average, and we did it again this year. If you look at our 30-year average, we exceed 9 percent," Glazier said.

"Our strategy is working. We've made up millions of dollars in losses that occurred when the market bottomed out in 2008-09," Glazier said.

Adjustments in employee contribution rates are undertaken in collective bargaining and are not adjusted based on high or low investment returns in any given year, Glazier said.

The day after San Bernardino officials first considered Chapter 9 protection, Redlands Councilmembers Bob Gardner and Jon Harrison joined Mayor Pete Aguilar in assuring State of the Community lunch guests that Redlands is on more "solid financial footing" than its neighbor.

To read reports from the State of Community lunch, click and .

City of Redlands Expenditures and Pension Costs, 2001-2002 to Present, Requested by Redlands-Loma Linda Patch

2001-2002 Expenditures - $32,762,911 (Audited)

                 Pension Costs - $1,729,409 or 05.27 Percent of Expenditures

2002-2003 Expenditures - $35,383,681 (Audited)

                 Pension Costs - $1,514,746 or 04.28 Percent of Expenditures

2003-2004 Expenditures - $37,146,499 (Audited)

                 Pension Costs - $2,627,476 or 07.07 Percent of Expenditures

2004-2005 Expenditures - $43,973,803 (Audited)

                 Pension Costs - $5,002,335 or 11.37 Percent of Expenditures

2005-2006 Expenditures - $50,468,449 (Audited)

                 Pension Costs - $6,543,563 or 12.96 Percent of Expenditures

2006-2007 Expenditures - $51,061,746 (Audited)

                 Pension Costs - $6,772,465 or 13.26 Percent of Expenditures

2007-2008 Expenditures - $52,584,437 (Audited)

                 Pension Costs - $6,873,613 or 13.07 Percent of Expenditures

2008-2009 Expenditures - $50,702,629 (Audited)

                 Pension Costs - $6,778,066 or 13.36 Percent of Expenditures

2009-2010 Expenditures - $48,481,310 (Audited)

                 Pension Costs - $7,339,515 or 15.13 Percent of Expenditures

2010-2011 Expenditures - $45,802,161 (Audited)

                 Pension Costs - $7,181,451 or 15.67 Percent of Expenditures

2011-2012 Expenditures - $46,921,295 (Estimated)

                 Pension Costs - $7,926,353 or 16.89 Percent of Expenditures

2012-2013 Expenditures - $48,089,759 (Adopted Budget)

                 Pension Costs - $8,000,375 or 16.63 Percent of Expenditures

The City of Redlands Finance Department provided expenditures and pension costs in response to a request. Redlands-Loma Linda Patch calculated the percentages.

For more information about CalPERS, visit www.calpers.ca.gov.

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