The future design of pensions in Modesto will be decided by voters, after the city council voted Tuesday night to put the issue to an advisory vote.

Detractors of the plan say it will cost the city unnecessary money, but Mayor Jim Ridenour told the Modesto Bee that an advisory vote could serve as a mandate for future councils. Modesto City Council Member Brad Hawn, who introduced the measure, seemed to agree.

“As we negotiate in the future, we will have evidence of what the people think,” said Hawn in an interview with PublicCEO. “There are lots of polls out there, but this is the best way to get the citizens of Modesto to chime in on the issues. These advisory votes will help whoever is mayor bargain with union leadership more effectively.”

Modesto, like many other cities in the state, has provided generous benefits to its employees for a number of decades. Hawn says that fixed, defined benefit programs like these are less responsive to economic conditions than traditional, 401(K), defined contribution plans.

“Nobody is bad and evil,” said Hawn. “The issue is that PERS came to the city and said you’ll never have to contribute again. And now they’ve come to us with a bill that we simply don’t have the revenue to absorb. I believe that this is the last, best opportunity to ensure long-term fiscal health by stabilizing and reducing the cost of city employee pensions.”

Last year, the city was asked to produce $17.3 million in contributions to CalPERS, and this year the cost could reach $20 million.

Hawn’s solution to the problem is stabilizing the pension program, and major reforms are best found by following the advice of the residents of Modesto.  The questions that will now be left to voters to decide are whether or not the city should:

Seek to move employees from a defined benefit plan to a defined contribution (401k style) plan for retirement benefits?
Seek to avoid “pension spiking” by city employees by moving to an average of the last three years of salary as baseline rather than current last single highest year, which is used currently?
Seek retirement formulas that increase the employee retirement age to mirror the private sector retirement age?

Because the issue will appear on the ballot, the questions were limited to 75 words.  The broad strokes that the questions take allow Hawn and the council in general to, “get a flavor of what the community is thinking.”

“I believe that with the voters’ input on these three questions,” Hawn wrote in an addendum to the council’s agenda, “the city council will be empowered to negotiate on behalf of the voters of Modesto for a more fair and equitable pension system that cuts cost, is fair to the employees and maintains a high level of service from the City of Modesto.”

The measure, which was approved by the council by a vote of 4-3, will now go to the City Attorney to draft help draft the final language to go on the next municipal ballot.