Wednesday Mar 30 2011
Mayor wants city to sue CalPERS
By: Jon Brines, Placer Herald Correspondent
In a surprise move last week, Mayor George Magnuson called for a lawsuit against the California Public Employees’ Retirement System. “I would like to have a closed session and take a look at the probability of filing a lawsuit against PERS to protect our interests so that we can maybe help protect the future of the PERS system so our employees have safe retirement benefits,” Magnuson said during the March 22 Rocklin City Council meeting. Magnuson said he’s been troubled by recent published controversies involving the largest public pension fund in the nation, with roughly $230 billion in assets managing retirement plans covering 1.6 million current and former public employees in California including Rocklin city employees. “Ultimately the cities, the citizens, are responsible for keeping PERS solvent and I think we need to do something,” Magnuson said. Magnuson pointed out a recent report calling for a criminal probe for PERS after its board kept the pension plans return target at 7.75 percent even though it has averaged only 4.5 percent over the last 10 years. “When our employee benefits aren’t sufficient and our contributions aren’t sufficient to keep the PERS solvent and they use unrealistic projections of 7 and 3/4 percent return on the money, I think we as employers should object to this,” Magnuson said. “Because we’re just setting up the cards for future disaster here.” Magnuson accused PERS of giving Rocklin misleading figures that have jeopardized financial planning. “PERS has mislead us in the past,” Magnuson said. “They’ve mislead us on the solvency and the sufficient funding for 3 percent at 50 for our safety officers. They’ve mislead many agencies.” CalPERS Chief Information Officer Joe Dear was on the network news earlier this month defending the targeted returns and said they will find managers that can make it an attainable objective over the long term. Last month, CalPERS officials estimated the pension fund shortfall at about $75 billion. Making up these types of shortfalls generally is the responsibility of employers, which in Rocklin’s case could put more tax dollars on the hook. That’s something the city wants to avoid as the great recession has shrunk the number of city employees, consolidated departments and forced cutbacks. During the last fiscal year budget (FY2009-2010) the city paid PERS $4,997,096 in contributions. “If you look at the projections, cities would go bankrupt,” Magnuson said. “The reason they are using those projections is to keep cities from really going crazy over the fact that they have to contribute so much money to PERS.” City Councilman Peter Hill balked at the idea of a lawsuit. “The idea about having our staff research the potential of the city of Rocklin filing a lawsuit against PERS, I think it is beyond the responsibility of the city of Rocklin,” Hill said. “This is something that either the Attorney General or one of the larger cities would do — not the city of Rocklin.” Councilman Scott Yuill agreed the projections were not sustainable, but did not think the city had the funds for a lawsuit. Rocklin City Manager Rick Horst said he is studying ideas for pension reform. Magnuson said the council needs to be more vocal to reassure the public. “I feel that we should let our opinions be known,” Magnuson said. Magnuson said he hopes the League of California Cities, which Rocklin is a member, would consider litigation.