08-24-2022 Workshop Packet - Laserfiche WebLink

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housing costs with a fixed-rate mortgage and local property tax limitations are unlikely to stay put forever, so their purchasing power will eventually erode. That supports using the CPI index and making COLA adjustments based on price increases in the past year. Where it gets complicated is the ability of public employers to finance inflationary salary and pension costs. As long as revenues keep escalating with inflation and the economy grows, there is no fiscal dilemma. But if a recession hits and we see reductions in tax revenues at the state and local level, the end result of hefty COLA payouts is that the budgets cannot afford them and layoffs and service reductions will be inevitable unless ample rainy-day money is set aside to weather that storm. For employers and collective bargainers, the recession-risk scenario requires that thought be given to strategies to assure sufficient sustainable funding to keep paying the COLA-inflated salaries. One obvious solution is to focus labor negotiations and workers’ attention on the necessity to properly finance a rainy-day fund for this contingency before making a generous COLA adjustment that might not be affordable in the next two years. That might mean that any permanent COLA salary adjustments should be lower than the CPI, with a provision for “catch up” payouts if the dreaded recession does not materialize. Or alternatively, the COLA adjustment could be bifurcated, with half added to salaries now and the other half paid out as a one-time COLA bonus payment that would be folded into future salaries at such time as revenue sufficiency is clearly established — when the storm of a revenue recession has passed, or if it never really arrives. Seeing STARs For pension funds, particularly those where public employers have volatile income tax revenues or operate under property tax limitations