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Recommendations to reduce costs for the city of Bakersfield's defined benefit pension plans: focus on plans financed within the general fund
Government agencies throughout California face complicated issues with public employee defined benefit pension plans. Market earnings on pension investments have plummeted with the decline of the U.S. economy. This market downturn increases pension costs for governmental agencies. As pension costs continue to command a significant allocation of governmental funding, services offered to citizens may decline to levels unsatisfactory to various stakeholders – citizens, elected officials, government agencies, private sector, and employees of these government agencies. However, salaries and benefits not comparable with the private sector and other governmental agencies may fail to attract qualified personnel to provide these very same services to citizens and the community. Public employee pension plans create political and emotional arguments by a myriad of stakeholders that may compromise and inhibit objective decision-making. Therefore, unbiased and objective analysis and interpretation is required even more with the politics and emotions inherent with this issue. This study explores pension costs, as reported within the General Fund, for the City of Bakersfield. The City of Bakersfield’s pension costs increased from a low of $3.7 Million in Fiscal Year 2000/01 to a high of $24.7 Million in Fiscal Year 2011/12 – a 562% increase. In addition, the actuarial value of the City of Bakersfield’s PERS plan assets, inclusive of all funding sources, over the accrued liability was $94 Million to the good in Fiscal Year 1998/99. For Fiscal Year 2009/10, the accrued liabilities exceeded plan assets by approximately $149 Million. Literary review of issues impacting public employee pension plans is also included in this study. Recommendations to curb public sector pension costs abound. This study focuses on recommendations offered by the Little Hoover Commission and Governor Brown’s “Twelve Point Pension Reform Plan.” This study then concludes with suggestions dealing specifically with rising costs for the City of Bakersfield’s defined benefit pension plans. At this point, a disclosure is necessary to address potential bias on the author’s part. The author of this study is currently a 26-year employee with the City of Bakersfield and is a participant in the Miscellaneous defined benefit pension plan.
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