More than half of Palo Alto's police officers and firefighters retired with disability benefits over the past five years, a rate that is far higher than in any other surveyed jurisdiction in Santa Clara County and that is almost double the county average, according to a report released Thursday by the county's Civil Grand Jury.
The Grand Jury report was prompted by a 2011 finding by the City of San Jose Auditor that a higher-than-average number of public-safety workers in San Jose had retired with job-related disabilities. Since then, the Grand Jury surveyed 12 agencies, including the county itself, and determined that overall about 27 percent of all public-safety retirements in the county "have been granted as retirements with a job-related disability."
Palo Alto had by far the highest rate, with 51 percent of public-safety workers claiming disability when retiring.
The cost impact of "industrial disability retirements," a term used to describe retirements due to job-related disabilities, varies widely from one jurisdiction to another, according to the Grand Jury, which used questionnaires and follow-up interviews to arrive at its findings. This type of retirement, the report states, is "available for public safety members whose job-related injuries or presumptive illnesses result in an employee being unable to perform the usual duties of their current position."
The new report raises (but doesn't answer) big questions about the safety of Palo Alto's work conditions, the city's process for approving disability claims and the rapidly rising costs of retiree benefits. The lattermost issue has emerged in the last few years as a major council priority, with council members having frequent discussions about ways to curb employee pension and health care costs.
Since 2009, the city has reached agreements with all of its labor unions that increase employee contributions to pension and health care -- expenses traditionally footed entirely by the city. Earlier this week, Utilities Department managers and a seven-member union of police managers became the latest labor groups to join this trend.
The city's new budget notes that the ratio of benefits to salary has risen from 50 percent in 2010 to 63 percent in 2012. The budget notes that the city's costs have "skyrocketed" (and will continue to grow) for a number of reasons, including the economic downturn, the demographics of the city's workforce and the "large retroactive benefits" granted in 2001 to public-safety workers and in 2007 to the remaining workforce.
The Grand Jury report emphasizes that the high number of "industrial disability retirements" helps to drive up benefit costs, though the impact varies greatly from one employee to another. In some cases, financial impact can be zero because the retiree may also be eligible for "service retirement" pay (based on the number of years of service) that is higher than the disability retirement. But the impact can also be significant, particularly when an employee retires with disability early in his or her career. Because these employees haven't contributed as much toward retirement during their careers, their disability claims force cities to raise their annual contributions to CalPERS, which administers the retirement plans for Palo Alto and other public agencies.
"The cumulative effect of the unfunded IDRs (industrial disability retirement) and other pension-fund obligations present a growing burden to entities and therefore taxpayers," the report states.
According to the report, Palo Alto rate towers above the other 11 surveyed jurisdictions, a puzzle that the report fails to solve. For example, Milpitas, Mountain View, San Jose, Santa Clara, Sunnyvale and Santa Clara County all have rates between 26 percent and 30 percent. Gilroy is a distant second with an "industrial disability retirement" rate of 43 percent.
"Noting the significantly higher IDR rates of Palo Alto and Gilroy compared to those of the other county entities employing law enforcement and fire personnel, one might reasonably ask if Palo Alto and Gilroy public safety personnel encounter a more dangerous workplace than other public safety personnel in the county," the report states. "The Grand Jury could not explicitly answer this question with the information available. Even so, the significantly higher IDR rates of Palo Alto and Gilroy should invite further review by their respective city governing body."
The determination on whether an employee qualifies for this designation is made by each employer agency rather than by CalPERS. The determination is based on "complete reviews of the duties and responsibilities of the applicant's current job, including the physical requirements of the position, competent medical opinion, and all medical and vocational information provided by the applicant, employer and the agency's workers' compensation carrier," the Grand Jury report states.
According to the city's budget data, the city has been spending an average of $1.27 million annually on worker compensation and disability payments in the Fire Department over the past five years. The amount climbed from $735,804 in fiscal year 2009 (which began in July 2008), to $1.3 in 2010 and to $2.2 million in fiscal year 2011 (which began in July 2010), before dropping back to $1.1 million in 2012.
The period between 2008 and 2012 was marked by an influx of retirements from City Hall, prompted in large part by benefit cuts that the City Council was pursuing in response to the economic downturn.
One factor that may contribute to the large number of disability retirements is the high number of firefighters employed by the city, compared to police officers. The fact that the city's Fire Department also serves Stanford University may contribute to the high percentage. Though the causal link is not explained in the report, there is at least a correlation between Palo Alto's high percentage of industrial disability retirements and the high percentage of public-safety personnel who are firefighters.
The Grand Jury pointed out that Palo Alto has both the county's highest industrial-disability-retirement rate (51 percent) and the highest percentage of firefighters in its public-safety force (55 percent).
The report includes as one of its three recommendations that Palo Alto "identify what factors other than its high percentage of firefighters influence its (industrial disability retirement) rate and implement a plan to lower its (industrial disability retirement) rate."
Chief People Officer Kathryn Shen said the Human Resources Department is investigating the issues identified by the Grand Jury and the reasons for Palo Alto's high rate of disability retirements. In an interview with the Weekly Thursday, she pointed to two factors that may have helped drive the trend: the fact that the Palo Alto Fire Department provides a paramedic service (other cities contract out) and the fact that the city's population more than doubles during the day time, increasing activity among public-safety responders.
The paramedic service, Shen said, is "the big theme" when it comes to the high rate of disability retirements. She said the city is "still sorting through our individual people who are in industrial disability."
Furthermore, in addition to serving Stanford, the city's public responders have to deal with a large population of day-time employees, Shen said, pointing to Stanford Research Park companies such as HP and VMWare and Xerox.
"There's a lot of employees who work in Palo Alto -- many more than our residents," Shen said.
City Manager James Keene said the Grand Jury's findings about how Palo Alto ranks in comparison to other cities are new to him. He told the Weekly that the city needs to look at creating a program to bring the rates down. He called the Grand Jury's findings and recommendations "reasonable" and said the city will be working on a formal response.
"Clearly, I don't want us to be an outlier in a negative way on any kind of findings," Keene said. "We take this Grand Jury report seriously and look forward to getting a better understanding and (looking at) how we can change those numbers."