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The business of government

Posted on March 23, 2017 by Sonoma Valley Sun

Local government was constituted to serve the interests of the citizens, interests expressed by democratically elected representatives. Those elected are legislative policy makers; the actual day-to-day work of government is performed by government employees. The money required to pay these employees is generated through taxes, fees, fines, assessments, levies and penalties.

Like most employees, government employees receive a salary and also benefits such as health care insurance, vacation and sick leave pay, and here in California, a government pension program. In the City of Sonoma, the vast majority of the cost of government is related to payroll and employee benefits; this is true of the cost of government everywhere.

Governmental employees in California, including school district employees other than teachers, are provided a pension through CalPERS, the agency into which payments are made by local and state government and school districts, and from which pension benefits are paid. CalPERS (California Public Employees Retirement System) is one of the largest pension “groups” in the nation covering over 1.8 million employees and with over $300 billion in assets. Pension benefits are paid from CalPERS assets.

CalPERS accumulates approximately percent of its funds through contributions from cities, counties, the State of California and school districts. The balance of its assets are largely built and maintained through investments in public and private securities, in other words, through Wall Street. Recently, Wall Street’s returns on investments have been less predictable than in earlier periods; due to the increased volatility in financial markets, in 2016 CalPERS decided to reduce its forecast returns on investments going forward from 7.5% per year to 7%. While on its face this seems modest, its effect on local governments is not; this change will require local governments and school districts to progressively increase their contribution to CalPERS by 4-5 percent yearly.

This added financial pressure on local government raises some important questions about policy and direction. Should local government reduce its payroll expense or increase its income? Should economic growth be used primarily to sustain the growth of government, or are other public benefits more important? Finally, how can an average citizen know enough to answer these vital questions?

Determining yearly financial data about our local government’s revenues and expenses is relatively easy. Comparing their rate of growth over the period of the past decade is difficult, however, due to changes in accounting methods, reshuffling of departmental expenses (such as the shift of personnel costs to a regional fire protection agency), and varying budget presentation formats. Yet it is critically important to get the answer to this question.

Are the increased revenues enjoyed by the City of Sonoma — increased TOT, sales tax, fees, etc. — accumulating and available for future projects, or are they simply covering the cost of the growth of government? If government is feeling financial pressure does it shift its attitude as it evaluates projects with economic impacts? Does paying a larger share of pension responsibilities incline government to become an advocate of large development for the sake of its own financial health instead of the community’s interests at large?

To us, these questions raise fundamental issues requiring clear and unambiguous answers. We suggest Sonoma’s City Council and City Manager redouble their efforts to explore these questions and to get us citizens the answers we deserve.

 



One thought on “The business of government

  1. No where in this mostly factual article does it mention. That employees are no paying nearly half of the pension contribution. If they are not in your town then your bargaining team did not do their job.
    A suggestion eliminate many of the upper school district offices trustees and so forth. These people do much of what principles did long ago. The school board should go as well. There is almost half the budget for schools. Then take a look at the city government payroll. City manager comes to mind. Why so high pay?
    You want a lean government. J

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