Retirement costs rising millions per year

June Casagrande

This year, the city will pay $9.25 million into the retirement fund

for city’s 751 full-time employees. Next year, the city will pay

$13.3 million into the state-run fund. Two years later, the cost will

skyrocket to $16.3 million.

The California Public Employee Retirement system, known as PERS,

which manages retirement funds for employees of most cities in the

state, hit on hard times when the economy took a nosedive four years

ago. The plan and the employer contributions are based on the

projection that the fund will earn about 8.25% a year. Instead, 1999

began a three-year streak of losses that didn’t turn around until

this year, City Manager Homer Bludau explained. In the meantime, if

the fund doesn’t make up the money somewhere, it won’t be able to pay

out benefits to retiring employees at the promised rates.

To make up the difference, the fund has upped the contributions

that the employers must pay.

“It’s a huge increase,” Bludau said. “But we’re not alone. Cities

across the state are dealing with the same thing.”

But unlike other cities, Newport Beach saw it coming. Anticipating

the crunch, the city several years ago began setting aside money to

cover the increased costs, Bludau said. The same kind of conservative

approach will allow city leaders to leave the money untouched this

year and make up the difference in the regular budget, cutting back

on capital improvement projects and other optional spending.

City Councilman Steve Bromberg said that while the cost increases

are hard to bear, they’re still worth it.

“We can’t live without the PERS system and it’s a challenge to

live with it,” Bromberg said. “But it’s a responsibility -- part of

taking care of our own. And if you want the best of the best

employees, this is what you have to do.”

* JUNE CASAGRANDE covers Newport Beach and John Wayne Airport. She

may be reached at (949) 574-4232 or by e-mail at

june.casagrande@latimes.com.