Governments in Santa Cruz County, Ca., are groaning under the weight of their required pension contributions prompting a series about the crisis in the Santa Cruz Sentinel newspaper dubbed 'pension precipice.'
The city of Santa Cruz, home of the county government, spent $10 million on pensions last year in a budget that was merely $77 million. But that's not the half of it. The city's required contributions are projected to increase by up to 4 percent annually over the next several years, forcing the city to make pension contributions that will amount to an estimated 40 percent of payroll for crucial departments like police and fire.
Facing the prospect of widespread layoffs, cops and firefighters have agreed to contribute more of their own salaries to pay off pension costs, and the city is now looking for similar deals with other city employees. Public safety workers have also agreed to a new two-tiered pension system which raises the retirement age for new employees to 55, instead of 50. But because the new system will only apply to those hired this year and after, it will only save the city budget $36,000 next year.
Meanwhile, 20 miles south on Route 1, Watsonville, a city of 45,000 residents, attributes nearly half of its $1.9 million deficit for next year to rising pension costs. Since 2004, in fact, the city's pension burden has doubled to nearly $10 million annually. This year alone pension costs are rising 13 percent. So far, police and fire unions have refused to negotiate concessions and the city recently sent out layoff notices to workers in both departments.