Jason Gibbs’ recent opinion piece regarding the looming “pension tsunami” in California is very timely. Indeed, skyrocketing pension liabilities affect nearly every public agency in California.
The question is whether our local officials will heed the warnings, which are loud and clear, or ignore them. It is only prudent to take responsibility and early action to ameliorate the situation and minimize the impact on stakeholders, especially future faculty, students and the taxpayers.
At a recent meeting of the College of the Canyons Trustees (Jan. 16), I heard the auditor for our local community college district sound the alarm. CPA Bill Rauch, of Vavrinek, Trine, Day Inc., took the time to soberly advise the board of the rapid increase in pension liability. Other post-employment benefits owed directly by the district amount to $13.4 million. But there is more! Net pension obligations, the proportionate share of liability owed by the district to STRS and PERS increased $15 million (16 percent) in one year to $108 million. Mr. Rauch said this liability will increase in future years and is a “real” obligation of the district.
One might think this sobering news might get the serious attention of the trustees, perhaps with a call to immediate action and review of spending priorities, a spending freeze, or timely report by the trustees’ finance subcommittee. You would be wrong.
Instead, the trustees thanked Mr. Rauch for his audit report and casually moved down the agenda to item 17.2 where they approved a new salary schedule (raises) for administrative staff at the college. There was no discussion how this action might impact the soaring pension obligation of the district.
The district will soon approve salary increases for the faculty that will in all likelihood add to the pension liability.
Property owners in the district owe more than $300 million in general obligation bonds (and rising) for the capital improvements to College of the Canyons. Unless the pension liability issue is addressed, the buildings will be under-utilized, repair and maintenance will suffer, there will be a decline in the number and quality of faculty, and classes will be cut.
The pension liability tide is already rising within clear view, and early intervention is required to avoid drastic service cuts in the future. It is the responsibility of the trustees to make a plan to deal with the issue now. Proper stewardship of available financial resources requires a proactive response to the ominous warning.
An investment in the future means dealing presently with debt incurred in the past.