Pension Debt is Devouring Local Services 

In the face of the ongoing climate crisis, the Humboldt County Board of Supervisors recently voted to urge the State of California to divest CalPERS, the State's retirement system, from fossil fuel companies to reduce emissions.

There is another area of impact regarding California's retirement system that needs to be addressed: its very significant and very negative effect on the ability of local governments to provide services.

In 2015, Eureka cut $800,000 from its police department as it spent $900,000 on pension debt. The years 2016 through 2019 saw a 19-percent reduction in full-time positions at the Eureka Police Department as the city spent $14.8 million on pension debt ($1 million in 2016, $3.9 million in 2017, $4.5 million in 2018 and $5.4 million in 2019). In 2020, Eureka cut $1.1 million and six positions, including those of four officers, from EPD, as it spent $5.7 million on pension debt.

In January of 2020, the first case of COVID-19 in the United States was confirmed and the pandemic made the economic situation much worse. With the arrival of COVID-19, Eureka entered double jeopardy, losing tax revenue as ever-increasing pension debt payments took funding away from services.

In 2020, Eureka brought forth Measure H to help its financial woes. Passed with 66 percent of the vote, Measure H more than doubled Eureka's sales tax, taking Eureka's existing 0.5 percent sales tax and adding a 0.75 percent increase for a total tax of 1.25 percent. Measure H was projected to bring in $9.6 million: $3.8 million from the existing 0.5 percent tax and $5.8 million from the 0.75 percent increase.

Measure H took effect in 2021. The hitch in my git-along, or the fork in my soup, if you prefer, is that Eureka's pension debt payment in 2021 rose to $6 million. After years of services cut or not provided due to pension debt payments, a situation made worse by COVID-19, Measure H was not a huge step forward. In fact, it wasn't even able to prevent the city from sliding backward, bringing in $5.8 million in revenue that went toward that $6 million pension debt payment.

Eureka City Schools is asking $4 million for the old Jacobs Junior High property, open land that could help Eureka with its critical need for housing. In 2022, Eureka City Hall put forth a maximum purchase price for the Jacobs property of $2.8 million. In 2022, the city also brought forth that it would be spending 10 times that amount — $28 million — on pension debt over the next four years alone, as it added balloon payments to its previously scheduled pension debt installments of $6.3 million in 2022, $6.6 million in 2023, $6.9 million in 2024 and $7.2 million in 2025. Eureka's yearly pension debt payments will increase to $8.4 million in 2029 and continue until 2040.

In June of 2022, Arcata had $29.6 million in unfunded liability for its pension program. Recently, the city announced its pension debt had increased by $1 million to $30.6 million, and that its minimum pension contribution will increase by $1.32 million this year, with staff also recommending an additional payment of $5 million. These pension payments will inevitably cause reductions in other services.

Last year, Fortuna authorized an additional $1.54 million payment for pension obligations.

In 2015, Humboldt County had $220 million in pension debt. In early 2021, it announced three things: Its pension debt had increased to $330 million; pension obligations increased from 18 percent of payroll costs to more than 32 percent; and pension debt payments will increase by $17 million per year for at least the next decade. Now, in 2023, Humboldt County has a $17 million budget deficit that's projected to grow.

Humboldt County roads currently have a Pavement Condition Index (a PCI) of 49 (out of 100), a "poor" rating. No additional funding for road maintenance would see the county's PCI drop to 25 over the next 10 years, a "fail" rating. It will require an additional $343 million over the next decade just to maintain the current PCI of 49. An additional $571 million would be needed over the next 10 years to bring the system up to a PCI of 70, a "good" rating. Troubling finances, indeed.

The Humboldt County Sheriff's Office, meanwhile, is asking the city of Blue Lake for an increase in payment for services from $146,000 per year to $315,000 annually. Blue lake has a total budget of a little more than $1 million, more than $87,000 of which is going to unfunded pension liability, according to City Manager Mandy Mager.

Thanks for staying with me on this. I realize this is a lot of numbers and can get confusing, but I believe in the saying, "Follow the money, find the truth."

The solution to this debilitated economic situation must come from our state government officials. Until this problem is solved, I echo the call of Eureka's ex-mayor, Susan Seaman. In her Feb. 9, 2023, op-ed about Eureka City Schools ("Eureka Needs to Stand Up to its Playground Bully"), Seaman stated very simply: "Demand transparency." Great idea!

To provide this transparency, I call upon Seaman, along with all her contacts in government, to bring forth a yearly PDSIR: a Pension Debt Service Impact Report. A PDSIR would be a yearly report from our good friends in government that would list their governmental agencies' pension debt payments for the upcoming year and what services would be cut or not provided due to these debt payments. The next year's report would have a review of exactly what happened the previous year along with projections for the upcoming year. Government transparency! Let's do this!

Divesting government retirement funds from fossil fuel companies to combat the climate crisis is a grand and noble gesture, but it does not address our local problems: crises in government staffing, road maintenance, homelessness, debilitated government finances. The willful indifference and lack of a plan from our friends in government to solve this problem is very disturbing. We are just starting down this path. We have many years of service loss ahead. How long before all of these cuts in services result in a catastrophic failure?

This a bad situation. It is bad for the current staff who are working hard but do not receive the support they need. It is bad for citizens who have services cut or not provided.

My primary concerns are: safety, quality of life services and economic fundamentals.

In 2020, in Eureka, an individual killed an elderly man and brutally stabbed two other people in three separate attacks. Weeks later, the Eureka City Council cut $1.1 million and six positions, including four officers, from its police department as it committed $5.7 million to paying down pension debt.

Patrick Cloney is is a 1975 graduate of Eureka High School and owned a family business for decades.