An aging municipal workforce combined with a looming benefit change that will hike health insurance costs for new retirees could mean the possible loss of almost half of Manteca’s current municipal workforce by 2016.
“It’s pretty staggering,” City Manager Karen McLaughlin told the Manteca City Council during Wednesday’s goal setting session.
McLaughlin said that if a person eligible for partial or full retirement in 2016 opts to stay on the job it would mean they’d have to retire under new rules that significantly increase the health insurance premiums they pay as retirees.
By 2016:
• 45 percent of the current workforce or 143 employees will be over the age of 50.
• 22 percent of the current workforce or 68 employees will be over the age of 55.
That many employees reaching the point where they could become eligible for partial or full retirement based on the number of years they have worked creates additional problems as well.
McLaughlin noted it would create a brain drain and loss of institutional knowledge if Manteca doesn’t prepare for the potential wave of retirees. It also means Manteca needs an effective succession program for current department heads and mid-level managers that might head out the door virtually at the same time to avoid paying a larger percentage of their retirement health insurance premiums.
One of the council’s adopted goals for the coming year is to start planning for the expected exodus in 2016 in a bid to make sure municipal service continues seamlessly.
Two possible ways to address the problem revolve around assessing the current workforce for potential department leaders and recruitment.
McLaughlin noted nearby cities have used a firm that comes in and searches for possible candidates within the current workforce to promote. They don’t simply look at the obvious but comb the entire city to see if there are those with the skills and inclinations to tackle jobs in other departments.
Manteca currently has just under 330 employees down from 430 six years ago.
The potential tidal wave of retirees isn’t the only personnel related issue on the horizon for Manteca.
The memorandum of understanding for all employee bargaining groups expires on June 30, 2015.
Salaries and benefits account for roughly 80 percent of the city’s general fund budget. In 2011 the city secured concessions from bargaining groups that were projected to save the city $4.2 million through June 2015. Those concessions played a key role in the city not suffering even more financial pains or further reductions in service levels.
McLaughlin as well as the council gives credit to municipal employees who took a pragmatic approach back in 2009 when the city laid all of the cards on the table. That’s when city leaders noted they had an $11.3 million deficit for the 2009-10 fiscal year that would swell to $15.9 million by the 2013-14 fiscal year if spending patterns in place at the time were not changed. The current budget projected only a $150,000 deficit that is being covered by tapping into reserves even more. The use of reserves also has played a pivotal role in keeping Manteca on sound financial footing despite a retreat in revenues.
Employees worked with city management to combine jobs as positions were left unfilled when people retired. They also made salary concessions by agreeing to go on unpaid furloughs and reducing compensation. A typical municipal employee has forgone close to 30 percent of compensation that includes what they actually were receiving and what the city had agreed to but had yet to receive in a four-year contract.
There is also a question of unfunded liability for retiree costs in the form of medical benefits and the Public Employee Retirement System. The PERS board is expected to increase the rates that cities and other agencies pay to help cover a major shortfall in their retirement plan.
The council several years ago took steps to improve the city’s long-term financial outlook by putting in place a two-tier retirement program. It essentially means when new employees are hired they will have to work longer and retire later in order to access their full retirement benefits.
In addition to contract and retirement costs, the council wants to restore fire and police staffing to pre-recession levels
At the same time seven police and fire positions covered through the Public Safety Endowment Fund will have to be integrated into the general fund within five years. That’s when they will deplete the account set up using development fees collected specifically for the purpose of public safety.
