City Manager Pinkerton Notes New Legislation Filled with Uncertainty, Downplays Immediate Impact on Budget

The Vanguard continues its series of articles examining the impact of the landmark pension reform legislations that was agreed upon last week by the governor and legislature, with a discussion of the impact on the city of Davis by Davis’ City Manager Steve Pinkerton.

Mr. Pinkerton’s take-home message is that this is probably as good a piece of legislation as we could have gotten, under the circumstances, but it is unclear some of the implications of it at this point, as few have had the chance to cull through the text line by line.

While provisions may prove helpful in the short term, the biggest impact will be on new hires.  However, it may take 20 to 30 years to really feel that impact.

“We have to deal with now, not the future,” Steve Pinkerton told the Vanguard in a phone interview, “It does give some comfort for the future.”

“By far the biggest issue we face,” he said, “is what we’re going to do with the people who are now employed and how we can get some protection.”

“We have to convince the existing workforce there have to be enough dollars down the road, that we have to get off this kick that it’s sustainable the way it is right now for existing employees.  Or that fixing it for existing employees has somehow shifted the sustainability issue for current employees,” he added, “It has not.”

Steve Pinkerton made it very clear that, given the current nature of ongoing collective bargaining for the round of MOUs that had expired on June 30, he could not specifically comment on the impacts that this legislation would have for the city budget or contract negotiations.

He believes that it does impact current negotiations.

“Every city negotiator right now is looking at a two-tier system,” he said.  “Now we already have one.”

As far as current negotiations goes, the two-tiered system, Mr. Pinkerton argued, was “probably the biggest thing.”

The biggest impact overall may be on the issue of cost-sharing.  But even there, Mr. Pinkerton cautioned that we still do not know exactly what cost-sharing means in this context.

“That was the part that I was very impressed that they put in there,” he said.  “But I don’t want be overly-complimentary until I see some of our experts wade through the [new legislation].”

He wants to have at least a month for everyone to wade through the legislation and see the interpretations as to what is legal and what is not legal and how it is going to be implemented.

“But at first glance, that’s a real positive step for dealing with some of our current issues,” he said.

It is his understanding that the cost-sharing is one of the few provisions that will impact current employees, but he could not go into details as to how that might impact current notiations.

Again he cautioned that the impacts of this legislation are largely unknown at this time.  He said that in the past, similar legislation had wide-ranging impacts that no one fully anticipated at the time it was written.

“I get particularly worried that when they shove through legislation without the proper vetting there’s often unintended consequences,” he said.  He added that, while they probably had to do it this way, “I’m absolutely 100 percent sure that we would have come up with something better had they even given us a month for the local agencies to review it.”

Mr. Pinkerton added pointedly, “That’s just not the way that the legislative leaders work these days and it’s pretty disappointing because it creates a lot more uncertainty for all of us.”

Defining exactly what constitutes a new hire will be a critical phase, however.

“If someone moves from city to city, does that mean they’re in the second tier?” he asked.  “In this legislation it’s pretty clear that when you move from city to city, you don’t suddenly become the lower tier.”

Steve Pinkerton noted that, while pensions are an important issue, the issue of retiree medical is a far bigger issue for the city of Davis right now.  As we have noted, the costs of retiree medical put it somewhere between 20 percent and 25 percent of payroll.

In the long run, this might help the city by raising the retirement age and thus reducing the years that the city has to fully cover employees.

However, as Steve Pinkerton was quick to note, the impact does not affect anyone currently employed.

And that’s the problem.  Other than implementing the two-tier, Mr. Pinkerton acknowledged that they are largely in the same boat in the near term.

“Other than symbolically, I think it was important,” he did acknowledge.  “There are a lot of things that haven’t been touched like the composition of the PERB…   That will have a lot more impact.”

In general, Mr. Pinkerton said he supports the defined benefit concept.  At the same time, he is not opposed to exploring a hybrid plan.

“I don’t have a real problem with where they’re heading with this,” he said.  “But I think I’d like to hear a lot more discussion about the hybrid.  I wish there had been more dialogue.”

“There’s not enough information out there to make a judgment on it right now,” Mr. Pinkerton added but he supports the discussion.

Steve Pinkerton concluded, stating that OPEB (Other Post-Employment Benefits) is the city’s biggest issue at this point.  We don’t disagree.

—David M. Greenwald reporting