By JACK WU
According to a November 2012 independent analysis performed by Stanford University Professor Joe Nation, Newport Beach has an unfunded pension liability of $265.5 million, which means that every man, woman and child living in Newport Beach would have to pay the city $2,983 each to cover the shortfall.
This was accomplished through a combination of underperforming investments by the California Public Employee’s Retirements System and the very popular and extravagant 3-percent-at-50 pension arrangement that many of the city employees were given.
Couple that with Newport Beach having more city employees per resident than almost every other Orange County city and you create the perfect unfunded pension liability storm.
How did this happen in Newport Beach? How did this Republican-dominated City Council allow this to happen?
Mayor Keith Curry recently outlined how healthy Newport Beach’s fiscal picture is, with more than $100 million in reserves, low-interest certificates of participation to fund the $138 million-plus Civic Center and Dog Park Bridge.
He also talked about how Newport Beach has reduced its government workforce by 10 percent and how City Manager Dave Kiff has done a fabulous job getting employees to agree to contribute more to their own pensions.
However, let’s revisit what life was like in 2006, when Curry was first appointed to the Newport Beach City Council, to see how he was actually partially responsible for the pension crisis.
In early 2006, before the full-time lifeguards’ contract was up, the firefighter union (which negotiated on behalf of the lifeguards) figured out that they didn’t have enough votes on the City Council to get the lifeguards the same benefits that the police and firefighters enjoyed, so they waited until the November 2006 election to hopefully get a union-friendly slate elected.
Sure enough, pro-union candidates replaced the anti-union incumbents, and the tide had turned.
The votes were taken in March 2007 to give the lifeguards 3-at-50 benefits, retroactive to July 2006, when their contract initially expired.
Yes, the same Mayor Keith Curry who was trumpeting fiscal responsibility last week voted for that retroactive 3-at-50 pension spike – twice – for the Newport Beach lifeguards.
All this unfunded pension liability will become a real issue when the Government Accounting Standards Board will require these pension liabilities on Newport Beach’s balance sheets starting in 2014.
Which happens to be the next election year.
– Jack Wu resides in Newport Beach.