The East Bay's most populous fire district is going broke.
As Contra Costa County Administrator David Twa put it, without changes or more money, the district will be bankrupt in 2016.
This is not, as some union leaders and at least one county supervisor claim, a revenue problem. This is primarily an expenditure problem -- specifically, a pension problem.
To be sure, the Contra Costa County Fire Protection, which relies almost exclusively on property tax revenue, suffered from the real estate downturn of the Great Recession. But if one looks at the other side of the ledger, a bigger problem stands out.
Generous retirement enhancements approved by the county Board of Supervisors in 2002 have driven the district to the financial edge. Today, more than a quarter of the district's budget goes toward pensions.
It's going to get worse. By the 2014-15 year, district payments to the retirement system and to cover bonds issued to help fund most firefighters' pensions will cost taxpayers about $1.19 for every dollar of payroll (excluding overtime). Firefighters will also be hit hard, with payments of about 27 cents out of every dollar.
County supervisors serve as directors of the district, which serves 600,000 residents in Central County, Antioch, Pittsburg and San Pablo. Last year, they asked voters to raise taxes to head off the financial crisis. But that would have only delayed the inevitable. Voters understandably said no, figure out how to live within your means, or at least first find a way to more efficiently deliver services.
The good news is that the supervisors are trying to do just that. With labor costs so high, most understand that the district must shrink its workforce.
Fire Chief Daryl Louder took a blunt approach by shuttering five of 28 fire stations. Meanwhile, the board brought in an outside consultant, Fitch & Associates, based near Kansas City, Mo., to examine more sophisticated options.
Rather than fully staff all stations around the clock, firefighters might be positioned based on historical data that indicates where and when they're most needed. Rather than responding to every medical call along with ambulance paramedics, firefighters might only be dispatched for the most critical cases. And rather than arriving on fire engines, which are costly to run, firefighters might travel to medical calls in smaller vehicles that are faster and more flexible.
For now, those are just options. Look for the consultant's draft report in October. Jay Fitch says his recommendations will also take into consideration funding for long-term capital equipment needs, which had been ignored in the district's recent desperate budgeting.
It's unfortunate that it took a financial crisis to prompt consideration of more cost-effective service models. And it's sad that foolish political giveaways a decade ago are driving the crisis.
Back then, it was clear to those with financial acumen that the pension increases were unaffordable. Public safety employees at least 50 years old had been eligible to retire and receive a pension ranging from 2 percent to 2.6 percent of their final average salary for every year of service. The multiplier depended on age at retirement. The new deal increased the multiplier to 3 percent for every year of service, regardless of age.
As a result, a 30-year veteran's starting pension, before annual inflation adjustments, equals 90 percent of top salary. Those with more experience can earn up to 100 percent. On top of that, they receive credit for unused vacation time, sometimes making retirement more lucrative than working.
At the time, the deal was applied retroactively. Workers could use the new benefit calculation for past years of service, even though they had been paying into the retirement system at rates that assumed lower retirement benefits. That immediately created a financial shortfall.
Furthermore, contributions to the system assumed unrealistically large investment returns. The returns didn't pan out, exacerbating the deficit. Now, the pension system requires larger contributions to help cover the shortfall and because it changed to more realistic investment assumptions.
The day of reckoning has arrived.
As pension contributions strangle the district's budget, more firefighters will lose their jobs. They should ask whether their enhanced retirement benefits were worth it. Of course, many of those firefighters who approved the deal have since retired.