Rocklin’s inflationary salary costs decreased

Recessionary measures prevent pension spiking
By: Jon Brines, Placer Herald correspondent
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“If we hadn’t done anything, the numbers would have gone up because of inflationary pressures. As it is, they have gone down.”

Karen Garner, public affairs and economic growth manager

The city of Rocklin’s recessionary financial moves are having an impact on pensionable pay, which is finally making a difference in long-term pension costs for the city and potential pension spiking for city employees.

City Manager Rick Horst reported to the City Council Feb. 12 that “pensionable pay (close to base pay) has decreased 10 percent, or $1,897,000, in the last two years.”

Rocklin’s Economic Growth and Public Affairs Manager Karen Garner said it was all a part of a strategy to reduce personnel costs.

“If we hadn’t done anything, the numbers would have gone up because of inflationary pressures. As it is, they have gone down,” Garner said. “It’s caused by a variety of factors.”

In the last five years, the city has used attrition, early retirement programs, frozen positions, job mergers and reorganization to pare down the number of employees by more than 100. Right now the city reports 226 full-time employees, but also has a number of part-time employees and contractors who aren’t eligible for pensions.

“When a person leaves or moves on, do we need to fill that exact same position? Can we combine it with some other need? In some cases the answer is contracting out, which we’re already doing,” Garner said.

Garner points to renegotiated labor contracts with the city’s unions that froze salary increases for years and, starting in 2009, changed the percentage the city pays for the Employee Paid Member Contribution benefits.

The EMPC benefit allows the city to report the value of employer-paid member contributions to the California Public Employees’ Retirement System as additional compensation for retirement purposes. This percentage reflects the members’ retirement contribution paid on behalf of the employees by the city. Even as the city begins to start incremental raises for city staff again, nearly a dozen furlough days annually and a past 5 percent across the board salary reduction for all employees has cut into pensionable pay.

An example of this is former Deputy Police Chief Dan Ruden, who retired from the Rocklin Police Department last weekend after nine years of service. Even though he was awarded a promotion from captain to deputy chief two years ago, his current salary of $147,000 was lower than his career high five years ago.

“The deputy chief promotion had no effect on my final compensation calculation at PERS and it didn’t create a larger pension liability,” Ruden explained. “My subsequent reportable (pensionable) salary never overcame that 9 percent hit, even with the promotion and the small increase in July. My highest 12 months was fiscal year 2008-09.”

Ruden said while he received a 7.5 percent bump in pay with the promotion in April 2011 and accepted a 3 percent increase in salary in July, the previous pay cut, mandatory days off and the assumption of the 1.5 percent EPMC change staved off any salary inflation.

The city’s financial moves prevented pension spiking in this case and got good marks from Marcia Fritz, president of the California Foundation for Fiscal Responsibility, a government watchdog group that’s been critical of the city in the past for pension spiking.

“Musical chairs in chiefs’ jobs statewide cost (taxpayers) a fortune due to end-of-career spikes,” Fritz said.

Garner warns the city’s era of big reductions in labor costs may be coming to a close.

“We’re always looking to see how to reduce costs or increase savings,” she said. “We have picked all the low-hanging fruit. We have accomplished that. It gets a little more difficult and complicated to find those kinds of savings.”

Fritz said the city needs to start looking at increasing the production of its workforce with fewer labor hours.

“Furloughs are a bad deal for citizens if production decreases and we still have to pay for health insurance, retirement benefits based on full salaries, holidays and vacation,” she said. “So workers are compensated more for the hours they actually work. No private business could survive doing this – reducing labor costs but reducing services even more.”

Garner responded by pointing out the total number of hours worked by all employees has declined due to reduced workforce and reduced overtime. However, she could not provide numbers to back it up.

“Hours worked are tracked through our payroll system, but there is not an existing report that would show a comparison of aggregate hours worked on an annual basis,” Garner said.

Fritz said the city has more work to do in order to be more fiscally responsible.

“They don’t get it. Otherwise this would be tracked,” she said.

The city recently reduced the number of mandatory days off from 13 a year to 10 and reopened the city’s offices to the public on Fridays.

As the city prepares, for the second year straight, a balanced budget without dipping into reserves, Garner said position freezes and attrition are behind them.

“It’s not that we’re saying, ‘There are no problems now go ahead and hire away.’ We’re certainly not there,” Garner said. “In the upcoming budget the message is, hold the line where it is. There is no green light on adding staff.”

That may be more difficult, as a recent report issued to the City Council during the January strategic planning workshop identified “reduced institutional memory” as a “major internal or present weakness” at the city due to staffing changes and also warned about “unpredictable CalPERS liabilities” as a “major external threat.”