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The pressure of an aging society has come down on South Lake Tahoe's local government as employees in their 50s elect to move on to the next stage of their lives.
The average age of the city's 215 employees is 43.1, less than seven years from the time of early retirement. As of Sept. 30, 2006, 106 retirees participated in the plan at a cost to the city of $1.1 million per year at an annual basis, city records show.
The city pays out 9 percent of salaries to public safety employees and 8 percent to other employees. These benefits have been doled out on a pay-as-you-go basis.
But with changing laws and more people living and working longer, the funds to pay into the California Public Employees Retirement System have grown and still grows. The city was required per state law effective July 1, 2005 to resign its public safety employees into the pool under the condition its unfunded liabilities would be paid into a side fund in addition to the city's routine contribution. The nearly $12 million will be paid on over the next 21 years - an agreement made between the local government and the state that "the city satisfied (on) its safety police and fire plans' liabilities," a city finance report indicates.
Beginning 2008, the city must report the benefit value and associated unfunded liability in its financial statements, according to new government standards.
The task of granting full health care and pension benefits to its employees seems more daunting to local governments.
According to a study by Steve Frates of the Center for Government Analysis, annual health care costs in California for state and local government retirees are expected to total at least $4.5 billion this year. The figure could swell to $31.5 billion by 2019, the Howard Jarvis Taxpayers Association warned.
The issue has prompted a whittling away at benefits. As of late, new city employee spouses are not covered in the health care benefits package.
"The sparks are going to fly because medical costs are going to continue to skyrocket," Councilman Bill Crawford said. The longtime South Shore resident ran for his council seat on the pledge of government fiscal responsibility. He wants the city to place that unfunded liability in a restrictive account.
Crawford has been through the drill as a former teacher for the Lake Tahoe Unified School District, another government agency that's gone through its own negotiation with unions and employees realizing their having to absorb higher out-of-pocket rates. The fat-and-happy days of full benefits appear to be a distant memory.
Facing the human consequence
After 17 years, former city firefighter Mike Lannoy retired in December 2005 at age 53 when he had a chance to walk away healthy and the state dropped the retirement age to 50.
"Most people I know go out on disability," Lannoy said, illustrating the dangerous nature of the job.
But even with his benefits secured through the city and state, Lannoy said he still pays $550 a month for he and wife Susan to pick up the remaining 40 percent the government benefits don't cover. They've been shopping for catastrophic care.
Lannoy's benefits are critical to his quality of life. A skier and hiker, he's torn tendons in his arm and knee - and he's active. Lannoy is aware of some weekend warriors who transition from being sedentary to extreme weekend warrior and end up paying for it at the doctor's office.
"I see more accidents from that," Lannoy said. "As we get older, we start to think about what we do."
Where do we go from here?
The situation appears exacerbated by a workforce living longer, the large cluster of baby boomers not saving enough for retirement and fewer pension plans offered as a safety net. In California, the share of workers with a job-based pension plan declined from 57.7 percent in 1980 to 49.4 percent in 2004.
The system has to give somewhere.
The employment rate of people age 55 to 64 increased by 7.4 percentage points between 1995 and 2007, the California Budget Project reported. More than three in five Californians in that age group were employed last year, up from 58.6 percent in 2000.
The public policy advocacy group uses the trend to argue leaving Social Security as a publicly funded federal government insurance plan. Talk has come up to privatize the fund.
The average age of the city's 215 employees is 43.1, less than seven years from the time of early retirement. As of Sept. 30, 2006, 106 retirees participated in the plan at a cost to the city of $1.1 million per year at an annual basis, city records show.
The city pays out 9 percent of salaries to public safety employees and 8 percent to other employees. These benefits have been doled out on a pay-as-you-go basis.
But with changing laws and more people living and working longer, the funds to pay into the California Public Employees Retirement System have grown and still grows. The city was required per state law effective July 1, 2005 to resign its public safety employees into the pool under the condition its unfunded liabilities would be paid into a side fund in addition to the city's routine contribution. The nearly $12 million will be paid on over the next 21 years - an agreement made between the local government and the state that "the city satisfied (on) its safety police and fire plans' liabilities," a city finance report indicates.
Beginning 2008, the city must report the benefit value and associated unfunded liability in its financial statements, according to new government standards.
The task of granting full health care and pension benefits to its employees seems more daunting to local governments.
According to a study by Steve Frates of the Center for Government Analysis, annual health care costs in California for state and local government retirees are expected to total at least $4.5 billion this year. The figure could swell to $31.5 billion by 2019, the Howard Jarvis Taxpayers Association warned.
The issue has prompted a whittling away at benefits. As of late, new city employee spouses are not covered in the health care benefits package.
"The sparks are going to fly because medical costs are going to continue to skyrocket," Councilman Bill Crawford said. The longtime South Shore resident ran for his council seat on the pledge of government fiscal responsibility. He wants the city to place that unfunded liability in a restrictive account.
Crawford has been through the drill as a former teacher for the Lake Tahoe Unified School District, another government agency that's gone through its own negotiation with unions and employees realizing their having to absorb higher out-of-pocket rates. The fat-and-happy days of full benefits appear to be a distant memory.
Facing the human consequence
After 17 years, former city firefighter Mike Lannoy retired in December 2005 at age 53 when he had a chance to walk away healthy and the state dropped the retirement age to 50.
"Most people I know go out on disability," Lannoy said, illustrating the dangerous nature of the job.
But even with his benefits secured through the city and state, Lannoy said he still pays $550 a month for he and wife Susan to pick up the remaining 40 percent the government benefits don't cover. They've been shopping for catastrophic care.
Lannoy's benefits are critical to his quality of life. A skier and hiker, he's torn tendons in his arm and knee - and he's active. Lannoy is aware of some weekend warriors who transition from being sedentary to extreme weekend warrior and end up paying for it at the doctor's office.
"I see more accidents from that," Lannoy said. "As we get older, we start to think about what we do."
Where do we go from here?
The situation appears exacerbated by a workforce living longer, the large cluster of baby boomers not saving enough for retirement and fewer pension plans offered as a safety net. In California, the share of workers with a job-based pension plan declined from 57.7 percent in 1980 to 49.4 percent in 2004.
The system has to give somewhere.
The employment rate of people age 55 to 64 increased by 7.4 percentage points between 1995 and 2007, the California Budget Project reported. More than three in five Californians in that age group were employed last year, up from 58.6 percent in 2000.
The public policy advocacy group uses the trend to argue leaving Social Security as a publicly funded federal government insurance plan. Talk has come up to privatize the fund.
