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County and its employees will contribute more to pensions

By BRETT WILKISON
THE PRESS DEMOCRAT

Sonoma County taxpayers and county government employees will have to pay roughly $6.4 million more in contributions to the county’s pension system starting in July 2012.

The increase is the result of a unanimous vote Thursday by the pension system’s board members to lower their fund’s estimated earnings projection by a quarter percent.

The old rate, in place since 2003, was 8 percent. The change to 7.75 percent is a more conservative projection that shrinks the assumed annual income from investment earnings, which make up the largest source of pension funding.

That leaves taxpayers and county employees to make up the difference, which they’ll begin doing next year. The exact cost and share for each group will be calculated this spring.

“If we made the decision with the cost hanging over us, we might be reluctant to make it,” said Rod Dole, the county auditor-controller who is a board member of the Sonoma County Employees’ Retirement Association, or SCERA.

Forecasting lower long-term market returns, scores of public pension systems across the state and nation have made similar moves. CalPERS, the state-government pension system and the nation’s largest public retirement fund, is expected to soon lower its rate from 7.75 percent to 7.5 percent.

Dole said SCERA’s move was one of several steps taken recently to keep the pension fund fiscally sound. Another was the county’s issuance of a $289 million pension bond last year, a step county officials said would save taxpayers nearly $92 million over 20 years and was the best way to cover $670 million in stock market losses from 2008, plus other mounting pension costs.

Already taxpayer contributions in the form of payments by the county and other public agencies are set to increase by millions of dollars over the next six years to cover market loses and other benefit changes.

Taxpayer and pension overhaul advocates criticized the county’s pension borrowing and Thursday’s move, saying it delays changes to a system they claim is “unsustainable.”

“It does nothing to solve the problem,” said Tom Lynch, a Guerneville resident and county planning commissioner who has called for reform of public pensions.

Lynch, former North Bay Assemblyman Joe Nation and others have called for the county to adopt an even lower earnings projection of about 4 percent, in line with the earnings rate on bonds, they said, and more realistic over the long term.

A 7.75 rate won’t bring revenue assumptions in line with retirement benefits, Lynch said. “We’ll continue to see massive increases in unfunded obligations and general pension system underfunding.”

SCERA administrator Gary Bei said the board studied the move over several months last year. He said the lower bond rates advocated by pension critics don’t comply with accepted accounting practices or reflect the system’s long-term investment performance.

Over a 20-year period, those returns now stand at 8 percent. Over a 30-year period, they are at 9.5 percent.

“The board’s job is to set the right assumption,” Bei said after the vote. “We’re looking at a 30-year horizon on this.”

Pension officials said the change will increase the total contribution shared by employers and employees by about a 2 percent rise on a pension fund’s latest $322 million payroll, or $6.4 million.

The taxpayers’ share of that total will likely be larger.

Taxpayer contributions to the pension fund for the County of Sonoma and several smaller agencies included in SCERA currently total about $47.6 million, or 56 percent of the non-investment contributions. Those figures do not factor in annual county payments on roughly $600 million in debt from a trio of pension bonds. The payments are now about $45 million a year, and are set to peak at $57 million in 2023.

Employee contributions are at about $37.3 million, or about 44 percent of non-investment income.

Based on the 56-to-44 percent split, taxpayers share of the increase could amount to about $3.6 million. The pension system’s nearly 4,000 employees would be responsible for about $2.8 million, or about $700 per worker annually.

“It’s a big deal,” said Ed Clites, president of the Sonoma County Law Enforcement Association, one of the county’s largest employee groups. He said the change does not need approval from employees, who already pay among the highest amounts into their pension systems in the state.

He added, however, that employees would probably accept the extra burden knowing that it’s designed to preserve retirement benefits and keep the pension fund solvent.

“It’s a tough balance,” he said.

Pension changes

Starting in 2012, the rise in contributions to Sonoma County pension fund are:

– Employer contributions: Up 7.6 percent, or $3.6 million, to $51.2 million.

– Employee contributions: Up 7.5 percent, or $2.8 million, to $40.1 million

Figures based on estimates provided by SCERA





11 Responses to “County and its employees will contribute more to pensions”

  1. Really Big Fish says:

    The responses to this article and pension issues is starting to sound like an episode of “South Park” with ” Bring It On” playing Eric Cartman. I quess we can call ourselves “Sonoma Park” of the wild liberal west. You keep feeding your newborn baby hamburgers and milkshakes and before you know he is a 5 year-old union member with no manners.

    Thanks to all who know exactly what and when it went wrong including all that wonderful math work. It has been my understanding, now recognized as my own dislusionment and trusting nature, that public employees were supposed to work for the public namely taxpayers, friends, neighbors, etc. Further, I was to believe that public financial managers would always be fiscally conservative in manageing taxpayer money never allowing a budget to go unbalanced.
    I believe my dislusion, for the betterment of the public and our quality of life, needs radical therapy. The issue at hand is to solve the deficit problem NOW not what or who caused it.

    It’s the actuaries, in house and consultant number nazis that have failed and are part of the problem. WE can use their skills but it has to serve the people not who is paying them. An adjustment now with a 30- year horizon?

    We have maybe 5000 people that have been paid well, learned a skill, educated themselves at taxpayers expense, had an opportunity to make a living, serve the public and now want the other 450,000 to keep paying for less services so as “bring it on” says will have enough cash to buy, probably a foreclosed house, and flip for a profit. Most of the other 450,000 residents don’t have the money and many lost their homes ( to house flippers)spent all their savings and are in dire straits.

    The pension issue could be solved realistically but unfortunately we have no real political leadership in the county nor country.

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  2. Reality is retrospect says:

    Thank you for lumping everyone together who lost houses. Some did not walk away. Some had their income reduced to the point they could not make the payments on a fixed mortgage. I don’t expect people here to believe, only doubt it. Sonoma county seems to love to group people together by many facets. Certain types of people do that. The point I was making is that even the overpaid, ungfrateful, greedy, pathetic, county employees are feeling the economic pinch. Not just the private sector.
    Did I expect sympathy, heck no. Understanding? I over reached. I hope they raise taxes through the roof, I live in Napa county.

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  3. Bring it on says:

    I told my co-workers no one would care about their sacrifice. I voted against taking the cuts. I told them to lay off more people. I am of the same mind as the rest of us taxpayers. Lay off bodies and mke it look good. It will on paper because of ignorant bean counters. I love it. I have mentioned it here before. Working in an essentail area like I do, we are required by law to have a certain number working 24 hours a day. Cut my staffing please. The overtime will allow me to flip another house. I can count on the money rolling in as I benefit from the knee jerk reaction of the ignorant. Don’t hate me because I will benefit from the cuts, that is just math. But definately lay off more people, it sure help the budget, mine. People just won’t admit the money they are throwing down a hole is the bloated social services/welfare. No return on the money, just increased costs. I hope they never get it. I have heard people using EBT cards in line at the store. When told about a sale on a certain item to save money, they just say, “I don’t care, it ain’t my money”.. I doubt this actually occurred. I doubt the county is low on cash. I doubt they will lay anyone off. I doubt I am right about these. Unions, don’t vote to take anymore pay cuts. The public cares less about you than you know and will take everything they can and toss you out. Bring it on, baby needs a new pair of shoes.

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  4. Reality in retrospect says:

    You doubt county employees took pay cuts? True, some managers got raises, but not 98% of employees. All because the county spent more obviously they were spending it on the employees. Currently most unions are in 2 year contracts, not open until next year. The pay cut deals they worked out to save millions required the 2 year contract. Now the county is in even worse shape due to poor planning. If the county needs more this year, they will have to ask for some of it from the unions. If someone reads the pay cut deals and then comments they don’t think they were real, they may have a tough time convincing the rest of unions to deal this year. It is sad that there are those who stick their head in the sand and ignore the sacrifice of others, only to turn around and make little of their suffering. When I show up to work next week, I will be sure to tell the 4 who lost their houses that there are those who doubt their address had to change and their kids had to tranfer to different schools. I will ask them if they are sure that really happened.

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  5. Common Sense says:

    Reality in retrospect, A lot of people loss their homes that Overbought and then the home-market collapsed and they walked away from them. The cuts are necessary as now you employees are becoming a drain on our overall recovery, JUST look at the bond passed last year to support your retirement funds and all we get is LESS IN our salary’s and TAXED to support yours.

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  6. Reality Check says:

    I don’t doubt county employees have seen take home pay cuts, either by lower salaries or increased deductions for benefits. But . . . the numbers in the county budget don’t point to a cut.

    In the 2007-08 fiscal year, the county employed 4,279 people (FTE) and paid $468.8 million for salary and fringe benefits. By 2009-10, the county had reduced employment by over 200 people, to 4,042, yet the cost to taxpayers for salaries and fringe benefits was $507.2 million, an 8% increase!

    If, as you say, employees took pay cuts, well, taxpayers didn’t see any savings. The budget shows, clearly, more money was spent to employ fewer people.

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  7. Reality in retrospect says:

    For the last 3 years, county employees have had their pay cut, 3 years in a row. Their health care was raise 140% and now an increase in retirement contributions which will further reduce take home pay. The county retirement was superfunded in 2002 and it was recommended they put the money into long term funds. No. They built a park. Now this, because it was mis-managed, people have a right to be upset. I personally know 4 employees in my 30 person unit that lost their homes because their paychecks were reduced too far to make their payments. Everyone, everywhere, of modest means, is suffering to some point. Don’t slam the county employees just because the press chose to only showcase private sector individuals who got slammed. Many public employees are taking big hits too, you just don’t see it on the front page.

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  8. Common Sense says:

    Sorry 4 You, Sorry you are out of touch with reality. Most of the private sector has been suffering and cutting back both in Salary and reduced benefits for years and all we ask is a FAIR share of cuts. I was a Major vendor support keeping the county and city running and they cut me with no after thoughts. So, quit you whining and take you lumps with the rest of us. At least you are keeping your job and benefits.

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  9. Reality Check says:

    What about saying that our county’s pension system is underfunded, optimistic about future investment returns, and potentially leaves a large debt for our grandchildren causes you to think I’m advocating low pay or training for anyone?

    The issue here is not the level of pensions, although that is an important issue, it is whether our current obligations are properly funded. They aren’t.

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  10. Sorry 4 You says:

    I’m not really sure what your saying or who you are grinding an axe with but maybe a reality check is in order. I have been with the county for quite a while and am DAMN proud of the lower echelons of folks I work with, and have met from other departments! Do you want deputies or 911 operators responding to you needs with no more than a Walmart level of training and dedication? I think not, your family deserves professional treatment; and likewise from all other areas of the county government. Maybe you should look at higher levels of supervision making high level jobs for friends and relatives, and phoney contracts to hidden connections within the county government. Your taxes and utilities pay for a high level of ethics; maybe call the Department of Justice or FBI, nepotism hurts All of us! Hey, maybe even thank a lower level public servant, they’ll smile and APPRECIATE your concern! Thanks for listening.

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  11. Reality Check says:

    In the 1990s, the S&P 500 grew at a compounded rate of 18%! It was, simply, an outlier decade that skews all averages significantly upward. It the first decade of this century, the S&P 500 grew at a minus 0.99% rate, hence the 20-year growth rate of about 8%.

    What will this coming decade’s performance be? If you know, please let us know. SCERA’s managers think they know. If they were a mutual fund the SEC would be slapping them down for suggesting that past returns are a guarantee of results.

    If they’re right, lucky us. If not, we are leaving a mountain of debt to our grandchildren that is unconscionable.

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