Two proposed ballot measures being considered by the City of Redding would likely have “little impact” on the city’s short-term budget crisis and could “potentially undermine future government essential services,” according to a study by the UC Davis’s Center for Regional Change.
Report highlights include the following:
– The proposed ballot initiative to create a two-tier retiree health system in which new hires receive no retiree health benefits would not affect the current budget crisis since its immediate impact is only on estimates of future costs, not current spending.
– The above initiative would risk increasing the city’s existing retiree health obligations through “adverse selection”.
– The proposed ballot initiative to shift the “employee” share of CalPERS retirement contributions does not address the real problem: how the City manages the employer contribution rate, which is low over the long term (6.4% 15-year average) but fluctuates with the economy.
– Putting away a modest 5% of payroll for non-safety workers during the six fiscal years FY 1999 to FY 2004—when the employer share was at or near 0% for this group—would have generated at least $10 million to shield the budget against current rate increases.
– Ballot measures are rarely helpful for solving difficult budget problems. The above proposals would create permanent structural changes in compensation; however, they involve complex legal, accounting and tax issues that are unlikely to be resolved in an up-or-down vote on a ballot measure.
“Our study found serious flaws in the proposed initiatives. They would expose the city to the risk of greater long-term costs and would not help stabilize Redding’s current or future finances. Retirement benefit cost containment is a complex issues best addressed through collaborative and careful examination of available option, not through ballot initiatives,” says study author Nari Rhee, Ph.D.
The report was sponsored by the UC Davis Center for Regional Change with partial financial support by IBEW Local 1245. The report is being offered to City Council members to support informed decision-making on the issues. The report can be found at: //regionalchange.ucdavis.edu/publications/CRC_Redding_Analysis_FINAL.pdf