Pension policy continues to have long-term impacts on local governments

For a look at how old pension policy can have long term consequences for your local government, look no further than the Moraga Orinda Fire District.

Daniel Borenstein looks at the ramifications of what he calls overly generous pension benefits in the district that the agency is still coping with today.

Six years after the Moraga Orinda Fire District drew national attention for its pension-spiking former chief, the agency continues to suffer a huge financial hangover from costly retirement benefits,” he writes.

“This is what happens when top administrators enjoy the same benefits they're supposed to oversee and elected board members are ignorant of the details, turn a blind eye for political expediency or even enable abuse. No one protects taxpayers.

“Fortunately, four of the five district directors who helped former Chief Peter Nowicki spike his pension are gone. But one, tax attorney Fred Weil, remains as the district tries to dig out from under enormous debt.”

The story is also a cautionary tale about districts seeking local control, and what that can really mean for local taxpayers. “In 1997, voters approved the district's formation to provide more cost-effective fire protection than they were receiving from the larger Contra Costa district. Now, less than two decades later, the Moraga Orinda district is buried in $79 million of debt for underfunded pension and retiree health care programs.

“The debt results from promising costly retirement benefits and then failing to properly set aside money to fund them. Instead, future taxpayers will be stuck with the obligation, which, like a giant credit card bill, will be paid off through installment payments, some lasting for 25 years.

As a result, for every dollar the district spends on base salary, it now spends another $1.14 to help pay down the debt and for new retirement benefits employees earn each year. Firefighters add another 26 cents out of each dollar of their base salary.”

Read the full story here


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