CalPERS debate shows confidence, cynicism

COSTA MESA — Like so much of the debate in the city to date, a public discussion on the costs of Costa Mesa employees’ benefits was a mix of optimism and pessimism, some focused on worst-case scenarios and others confident the costs will be minimal.

The dichotomy extended beyond city officials and the public Tuesday night.

Even the two experts the city brought in to discuss how much the city contributes to public pensions — Richard Santos from the California Public Employees’ Retirement System (CalPERS) and John Bartel of Bartel Associates — presented different philosophies on how much to pay into the state’s pension fund.

“There’s no right or wrong answer to that question,” Santos said outside of the council chambers.

At the heart of the discussion is how much the city can expect to increasingly pay — a little or a lot — over the next five years toward its employees’ pensions while the economy slowly tries to recover.

City employees’ benefits are covered by revenues from CalPERS investments and Costa Mesa’s own monthly contributions. As the economy has suffered, so have those investments, leaving the city on the hook for more and more.

While Santos reassured the city that in the long term, as in decades, CalPERS investments have recovered and costs to the city have smoothed out, Bartel suggested the city pay even more than what’s required to pay down its debt to CalPERS.

“Think of it as a minimum,” he said.

Councilman Steve Mensinger emphasized that there’s no guarantee the economy will recover and that another recession-type loss could happen again, which would leave the city with the bill. Mayor Pro Tem Jim Righeimer asked what happens if a city can no longer cover its part of the pensions, something that’s only happened once in CalPERS history.

“It’s in the lore of CalPERS,” Santos said, noting that it was so long ago, today it’s talked about more as a legend than a lesson.

Costa Mesa’s bookkeepers will readjust their CalPERS cost projections next month because of the pension fund’s announcement of its returns being better this year than expected. If city employees continue to contribute part of their portion to the fund, the city’s costs could almost level out, city officials have said.

But city leaders argue that would leave an insufficient amount for maintenance and improvement funding, which they already consider at bare bones.

If the city were to cut staffing — such as through outsourcing nearly half of the city staff, like is currently being explored — Costa Mesa would have to pay a higher percentage to the pension fund, though it’s actually fewer dollars because there’s fewer employees.

It’s basically contributing a bigger piece of a smaller employee pie, Santos said.

Because of state law, Costa Mesa cannot renegotiate its benefits packages with city employees until its most recent agreements expire, Santos said.