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Her concerns and comments are related to the huge divide between the private sector and the public sector that is coming to a crisis point in California. She was led to believe that Council needed to follow the State in what she believed is an excessive retirement rate, and it is her obligation to try and turn this back to a reasonable rate. In order to cut costs by attrition, Mr. Brozosky read that the State is not hiring new employees to fill positions when employees retire. At a certain point, this would mean that there are actually fewer employees working to pay the retirement benefits; therefore, everyone's contribution for retirement benefits at some point would increase. Ms. McKeehan said that employee retirement rates are actoarially set individually by agencies. The City of Pleasanton has three different actuarial rates: miscellaneous, police and fire. The State has its own rates. Mr. Brozosky believed that if the City of Pleasanton had more employees retiring, it would affect Pleasanton but not other cities. Ms. McKeehan said that it is not so much someone retiring as it is a combination of factors. Mr. Brozosky was concerned that if there are fewer people paying into PERS, everyone's share must increase to get the same dollar amount. Ms. Rossi said that each agency pays its share into PERS. At a certain point, Mr. Brozosky believed that PERS would adjust everyone's rate so that it can continue to make retirement contributions to those employees who retire. Periodically, PERS will continue to adjust the actuarials based on the current conditions. In order to make up for it, Ms. McKeehan pointed out that this is why there has been a portion of a jump in the PERS rates. Mr. Brozosky asked if PERS anticipated another increase in retirement rates in the immediate future? Ms. McKeehan said that over the next several years the PERS rates would increase and after that time, the rates will level out. PERS adjusts the retirement rates every year, which is why the City's retirement rates have gone as high as 26 percent in the past and as low as zero. She pointed out that while the stock market has a major impact both positive and negative on the rates, there are significant real estate investments that are also made in the PERS investment portfolio. Ms. Rossi noted that the reason so many agencies are in trouble is because for ten years, they have paid zero rates into PERS. Now these agencies must pay their normal costs plus pay the losses into the portfolio. The losses on the portfolio are a smaller percentage than just the normal costs. Pleasanton City Council 20 06/15/04 Minutes