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Retiree costs impact less in Manteca
Citys general fund takes much smaller hit than in larger cities
Less general fund money spent on retirement costs translates into more services such as police funding. - photo by HIME ROMERO

Pension costs — considered by economists as one barometer of a city’s long-term financial health — account for 30.9 percent of the general fund budget in struggling cities such as San Jose.

The more retirement costs a city pays from their general fund the less money they have for day-to-day municipal services such as police, fire, parks, library, streets, and other government operations. Services such as water, sewer, solid waste and the golf course are paid for through users fees and aren’t part of a California city’s general fund.

Manteca’s general fund contribution for employee retirement costs comes to almost $2.9 million or roughly 10 percent of the $28 million annual budget. The city also pays about $1 million annually for all retired employee health benefits. With roughly two thirds of employees being paid via the general fund it means all retirement benefits account for less than 13 percent of all Manteca general fund expenses.

That is low compared to other California cities such as Torrance at 24.6 percent, Roseville at 25.3 percent, Oakland at 28.9 percent, and Pasadena at 43.0 percent based on data gleaned by Merritt Research Services.

Merritt’s survey of the nation’s 250 largest cities shows the median general fund commitment to retiree costs was 10 percent in 2012. That’s up from 7.75 percent in 2007.

Manteca Finance Director Suzanne Mallory noted general fund retirement contributions vary wildly from city-to-city based on how retirement fund investments are performing, worker contracts and pay plus what employees contribute. Three years ago city employees stepped up to ease long-term budget problems for the city by agreeing to pay more into retirement and increasing the time it takes for new employees to become vested. Cuts in pay coupled with higher payments into retirement plans equated to a 20 percent plus reduction in employee compensation across the board.

That move is credited as the biggest factor in Manteca being able to get the structured deficit to the point it will either disappear this fiscal year or be within $150,000 of going away.

When a city’s annual budget has a structured deficit such as Manteca, it means they’re taking in less revenue during a fiscal year than they are spending. Cities often cover the gap with money set aside in reserves during previous years.

Manteca has been doing that but needed employee concessions to move toward ultimately eliminating it to put the city on a more firm financial footing.