HomeMy WebLinkAboutID-2986-Colleague-Memo
CITY OF PALO ALTO OFFICE OF THE CITY CLERK
July 2, 2012
The Honorable City Council
Palo Alto, California
Colleagues Memo From Vice Mayor Scharff and Council Members
Burt, Holman, and Schmid on Council Direction Regarding “Benefits
Strategy”
BACKGROUND
In recent years, the cost of employee benefits and pensions has risen dramatically
for the City of Palo Alto, reducing the funds available for our community’s
necessary and valued services and infrastructure:
--The proportion of dollars paid for employee benefits to salaries rose from 23%
in 2002 to 54% in 2010;
--The Long Range Financial Forecast projects employee benefits exceeding salaries
by 2022;
--Employee benefits now make up 27% of total General Fund expenditures;
--Governor Brown and the California League of Cities have outlined a Pension
Reform Plan that attempts to put state and local government employers “on a
more sustainable path to providing fair public retirement benefits”. In addition,
San Jose and San Diego voters have recently adopted significant pension and
benefit reform initiatives.
PURPOSE
The Council should provide policy direction regarding future reforms and
innovations in employee benefits, pensions, compensation and other aspects of
employment with the goal of building a modern, flexible workplace environment
for Palo Alto City employees while also assuring sustainable costs for its citizens.
This initiative will invite creative solutions from employee and employer
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perspectives, providing policy direction and long term strategies. Many of these
issues are subject to bargaining and would be negotiated with the City’s
recognized bargaining units.
The considerations will address the issues raised in the Governor’s and the League
of Cities’ pension reform proposals as well as broader considerations, including:
How should the costs of pensions be shared between employers and
employees?
Should the City encourage changes in state law that would allow the City to
establish a hybrid plan combining defined benefits, defined contributions
and social security?
What is the appropriate and sustainable vesting for pension rights? Should
any part of health benefits vest on retirement?
What retirement age would make for a proper transition to Medicare
coverage for retiree healthcare? Should the City encourage changes in
state law to give cities the option of setting a later retirement age?
Are retroactive pension increases justifiable and, if not, how can they be
prohibited?
How do we establish fair criteria for retirees’ contributions to health
benefits?
Should the city move toward fixed health benefit contributions?
How can the city provide greater employee choice in health benefits?
Should the city encourage changes in state law that would allow the City to
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offer employees a choice of significantly reduced pension packages in
exchange for more desirable near term compensation and employment
terms?
Can and should the City structure and finance an optional program to buy
out existing post-employment obligations that may be vested?
How should training, education, job flexibility, at-will employment and
seniority operate within a modernized employment program that seeks to
attract and retain a high-performing workforce and foster a desirable
workplace during a time of changes to traditional benefits?
How should the timing of negotiations and the City’s position in negotiations
relate to the Long Range Financial Forecast?
How should the timing of negotiations relate to the City’s annual budget
process?
Are there alternative considerations that merit discussion on how to
accomplish a healthy work place and foster job satisfaction and cost savings
thru non-economic employee benefits?
PROPOSAL
The Council will agendize a public discussion of sustainable pension, retiree health
care, other benefits and terms of employment. Discussion will include whether
the Council supports the proposals of the Governor and the League of Cities. In
addition, the Council will establish a vision toward sustainable benefit options and
a more flexible, modern workplace environment.
Representatives from the City’s bargaining units will be invited to participate in
the discussion of the proposals and the current dynamic between benefits and
salaries. The Council recognizes that changes in terms and conditions of
employment that are within the scope of bargaining under state law are subject
to collective bargaining.
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TIMING
Discussion of the topics raised in this Memo will occur by September of 2012.
Whether further consideration of these and related topics should be necessary
will be determined during this discussion.
RESOURCES
Staff support in outlining the options available under current law, key cost
elements in the current benefits program and the cost impacts of various reform
proposals.
Department Head: Donna Grider, City Clerk