California Fire Districts are Morphing into Retirement Plans

The East Contra Costa Fire District (ECCFD) has financial problems because it pays more for retirement benefits than it does in salaries to current employees. With most of its staff eligible to retire on the 3% at 50 formula and at least two current retirees receiving more than $100,000 annually, the district is functioning as more of a retirement plan than as a firefighting unit. Rather than economize on its pension benefits, district leadership has closed fire stations and made repeated attempts to extract more taxpayer funds.

Actuaries for the Contra Costa County Employees’ Retirement Association (CCCERA) have calculated a 130% pension contribution rate for ECCFD firefighters for the upcoming 2017-18 fiscal year. This means for every dollar the ECCFD pays in firefighter salaries, it must pay $1.30 to the pension fund. Of the $12.9 million the district plans to spend in 2017-18, $4.6 million is earmarked for retirement related expenses, which include health insurance as well as pension contributions.

District officials have tried to address ECCFD’s spending problem by trying to raise more revenue.  In 2012, voters rejected the district’s proposed $197 parcel tax by a 56-44 margin. Despite this defeat, the district was able to temporarily reopen a couple of its shuttered fire stations with a $7.8 million federal grant. After exhausting the grant funds in 2014, ECCFD returned with hat in hand to area voters. In March 2015, officials mailed ballots to 38,529 area homeowners asking them to approve a $95 per year assessment. Only about one quarter of the ballots were returned, and 53% of those voting rejected the proposal.

Having failed to acquire new revenue through a tax increase, district officials are pushing to obtain a greater share of the one percent ad valorem tax that property owners currently pay. Any such adjustment would require legislation at the state level. In a September 2016 letter to State Senator Steve Glazer, ECCFD Fire Chief Hugh Henderson argued that the current allocation system was biased against agencies, like his, that were formed after the passage of Prop 13.

As the East Bay Times recently reported, ECCFD have prevailed upon the Oakley City Council to endorse an increase the district’s allocation, which is now 7.5%.  Other area officials are less supportive. Six school superintendents have written their own letter opposing the change. Each dollar of new revenue for ECCFD under a reallocation would reduce the amount of tax revenue available to the school districts, cities and other special districts within ECCFD’s area:  it is truly a zero-sum game.

Taking money away from schools to pay firefighter pensions may seem hard-hearted to the independent observer, but ECCFD couches it as a public safety issue.  In his letter to Senator Glazer, Henderson notes that, with only three stations, the district cannot respond to most fires within the recommended timeframes of four minutes for urban areas and eight minutes for suburban/rural areas. Of course, much of rural California is more than eight minutes away from a fire station – so East Contra Costa is not unique in that respect.

It is also worth noting that suburban and rural fire districts do not respond to that many fires. Although ECCFD does not provide a breakdown of its 6875 service calls in 2016, statistics are available from a neighboring district.  In San Ramon Valley, fires and explosions accounted for just 2.5% of the department’s calls.  False alarms made up 7%.

The overwhelming majority were calls for medical assistance such as transportation to a local hospital. Clearly this is an important function, but it is less obvious that it needs to be carried out by public safety officers eligible to retire in their 50s at up to 100% of final compensation.

While ECCFD has an extraordinarily high pension cost burden, other Contra Costa County fire districts are not far behind as shown in the following table:

Sources: CCERA Retirement Board Agenda Package, October 20, 2016; author’s calculations.

Because all five systems are well below fully funding, there will be further upward pressure on contribution rates in the coming years. It is also worth noting that both the Contra Costa County FPD (CCCFPD) and Moraga-Orinda FPD (MOFPD) districts are also servicing pension obligation bonds. For CCCFPD, debt service on its bonds was $11.9 million in 2015, representing almost 10% of the district’s revenue.

Back at ECCFD, Chief Henderson will no longer have to worry about finding new revenue to offset the district’s unsustainable pension burden.  He retires later this month at the age of 54 – on a pension that will be well over $100,000 annually.

Editor’s Note:  An earlier version of this piece referred to a pension cap of 90% of final salary. While a 90% cap applies to CalPERS pensions, the cap for CCCERA and other county plans is 100%.  If a public safety employee on the 3% at 50 formula works at least 33-1/3 years he or she can retire on full salary.

Marc Joffe is the Director of Policy Research at the California Policy Center.  Marc would like to thank Kris Hunt and Wendy Lack of the Alliance of Contra Costa Taxpayers for their contributions to this analysis.