Commentary: Explaining the work of the Pension Oversight Committee

April 14, 2014|By the Costa Mesa Pension Oversight Committee

Editor's note: Attorneys John Stephens and Tim Sesler, two members of Costa Mesa's Pension Oversight Committee, asked the Daily Pilot to publish the panel's findings and recommendations. The committee put together a series of three articles, titled "Fast Facts," that seek to explain and simplify the complex subject matter to residents. This is the first installment. Part 2 will appear Thursday.

Throughout the nation, the subject of "unfunded public pension liabilities" has captivated headlines serving as vivid illustrations of how they place city finances in peril.

Unfunded liabilities occur when the amount of money set aside to pay guaranteed public pension benefits is insufficient to cover their anticipated costs. As unfunded liabilities increase, they consume a growing percentage of our financial resources and jeopardize our ability to fund important municipal services, including police and fire protection, parks and road maintenance.


The city of Costa Mesa is not immune to the dangerous developments in unfunded pension liabilities. A recent study of our financial position indicates that Costa Mesa pensions are underfunded by as much as $196 million.

Additionally, the fund that provides for retiree medical benefits is estimated to be underfunded by $32 million. As a point of reference, for the current year, the general fund budget for the entire city is $103 million. Simply stated, it is possible that the unfunded amount of our future obligations exceeds twice our annual city budget.

In response to the magnitude of these matters, the Costa Mesa City Council approved development of the Pension Oversight Committee (POC) in February of 2013. Following public notice, volunteers were interviewed by council members and then appointed to the POC at the April 16, 2013, council meeting.

The mission of the POC is to focus on current and long-term pension obligations in a nonpartisan fashion.

Key points of emphasis include:

• Review annual and long-term pension commitments as they pertain to the city's California Public Employees Retirement System (CalPERS) retirement account with an emphasis on controlling unfunded obligations.

• Study and advise on what financial triggers led to an unfunded position of about $196 million.

• Encourage the city to maintain adequate reserves and ratios per council guidelines and prudent fiscal management.

• Review negotiated pension and compensation packages as they pertain to each employee bargaining unit.

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