By Joe Tash
The Santa Fe Irrigation District’s board of directors has directed staff to research how much money the district would save if it reduced retirement benefits for new employees, in a bid to trim operating costs.
Government agencies across the nation are grappling with escalating employee pension costs, following increases granted to workers in previous years. The problem of escalating costs was exacerbated by the financial downturn, when pension funds’ investment returns plummeted.
Irrigation district directors discussed potential savings in both pension costs and health benefits for retirees at their board meeting on Thursday, March 17. Following the open session, the board went into a closed session meeting, where members asked staff to gather information about possible savings for both pensions and retiree health benefits, according to board members.
“The party’s over, we need to contain the pension costs,” said director Andy Menshek, who was elected to the board in November.
The district has come under increasing pressure from ratepayers to cut expenses in the wake of a series of rate increases. In December, the board raised rates by 12 percent for the current year, and approved potential rate increases of up to 12 percent for each of the next two years. These increases came on top of rate hikes totaling 50 percent over the past three years.
The irrigation district provides water to some 22,500 residents of Rancho Santa Fe, Solana Beach and Fairbanks Ranch. It has 48 employees, although five positions are currently vacant. Under the district’s current retirement program — administered through the California Public Employees’ Retirement System — workers can retire at age 55, and receive 2.7 percent of their final year’s pay for each year of service.
Under a second tier of retirement benefits for new hires, employees would receive reduced benefits, such as being able to retire at 60 and receive 2 percent of pay for each year of service.
Irrigation district general manager Michael Bardin said in order for a second tier of retirement benefits to be established, the district would need to amend its contract with CalPERS and also negotiate the change with the district’s employee association.
Several directors expressed their interest Thursday in exploring potential savings in both pension and retiree health benefits. One option is to find a new provider for the health benefits, which are now provided through a contract with CalPERS.
“My personal thinking is the current system is not sustainable. Therefore we have to look at ways to correct where we are,” said board president Michael Hogan.
In the current fiscal year, which ends in June, the district has budgeted $1.2 million for employee pension costs, and $632,000 for retiree health care, according to Bardin. The latter amount includes both the current year’s premium for retiree health care, and payment into a fund to cover future retiree health care costs.
The district’s operations budget for the current year, including debt service, is $22.8 million, meaning pension and retiree health benefits account for roughly 8 percent of spending.