By BRETT WILKISON
THE PRESS DEMOCRAT
The Sonoma County Board of Supervisors on Tuesday unanimously endorsed a plan to overhaul the county’s pension system, saying that changes aimed to avoid soaring taxpayer costs and shift more of the burden onto workers will not come easily or overnight.
“To me, this is like trying to stop a freight train or turn a ship around. It’s going to take some time,” said Supervisor David Rabbitt, who along with Supervisor Shirlee Zane headed up a nine-month study that led to the 135-page report.
Its recommendations include a mix of proposals that would affect current and future employees. They include a cap on pensions for all employees, a higher retirement age and less-generous benefits for new employees, and a change in the makeup of the county’s pension board.
The proposals are expected to shape employee contract talks starting in March.
Overall, the plan seeks to save taxpayers $115 million to $150 million over the next 10years by altering a sharply escalating cost curve.
But it hinges on deals at the bargaining table, which wouldn’t kick in until at least mid-2013. Other changes would require modifications in state law and some could result in legal battles.
Zane called those hurdles “daunting.”
But the report does more than any county effort so far to explain the problem and call for urgent action, supervisors said.
As is, taxpayer-paid pension costs for county employees, already up 360 percent since 2000, are set to more than double in the next decade, climbing to $209million — or 28 percent of total compensation — by 2021. That would erode money available for public services, supervisors said.
“It’s obvious that continuing with the status quo could very well jeopardize the financial health of the county,” said Supervisor Mike McGuire.
Rabbitt, who serves on the pension board, gave a forceful presentation on the causes behind the rising costs, and the need to both share those expenses with employees and reduce investment-market risk.
He noted that in eight of the past 20 years, or 40 percent of the time, the pension system has missed its investment earnings mark, jeopardizing the main source of pension fund revenue.
The result has been three rounds of county borrowing since 1993 to pay off $617 million in unfunded pension obligations.
Those moves may have been useful at the time to refinance pension-system losses, county officials said. But in backing tighter limits on county debt Tuesday, leaders all but swore off such tactics going forward, citing public frustration over the county’s $1.25 billion debt load.
More than 60 percent of that figure comes from the pension bond debt, now at $515 million, and unfunded pension obligations, at $249 million, the report showed.
“Anyone who is part of the system has to be concerned about that,” Rabbitt said.
To address the issue, supervisors would reconfigure payroll pension contributions so that employees pay the same amount as taxpayers — a move that would essentially share market risk. Currently, the county pays more into the system than the employees.
A second move would look at further lowering the county’s discount rate, which is used to determine contribution levels needed to pay for future pensions. That change would increase contributions by employees and taxpayers in the short term but reduce market risk over the long term.
“Up until now we have assumed all of the risk,” Zane said. “That’s in comparison to private employers, which expect employees to bear all of the risk. I think there’s a happy medium between the two extremes, which is what we’re aiming for.”
Supervisor Valerie Brown said she was concerned that an emphasis on personal savings accounts and increased risk-sharing for employees would lead to faster workforce turnover and less income security for retirees.
“It’s a very slippery slope. There are long-term consequences to what we do,” she said.
Labor leaders who spoke Tuesday voiced some support for the plan, but said they were worried about changes with a disproportionate impact on current rank-and-file workers.
“Let’s not join the media frenzy and cry the sky is falling but instead work on long-term solutions,” said Marcia Barton, a field representative for Local 1021 of the Service Employees International Union, the county’s largest employee group.
Several county retirees urged the board to lead by example, with rollbacks to the extra pay and perks that that can spike pension amounts, especially for top officials.
Ron Piorek, a retired deputy county administrator, took aim at an ordinance that requires the county to pay 50 percent of the pension contributions owed by supervisors and to provide administrative leave, which elected officials and top managers get in lieu of overtime. Both groups can cash it out to boost pensions. The overtime worked by other employees is excluded from pension calculations.
“Why are county supervisors accruing administrative leave?” Piorek said. “It should have been looked at.”
Among their proposals, Zane and Rabbitt called for an end to pay practices that can lead to pension spiking.
At the bargaining table next year, that would require a rollback in the 114 county job premiums, including special duty pay, uniform and auto allowances, most of which apply toward pensions and would continue to do so without any change to state law, said County Counsel Bruce Goldstein.
Supervisors nodded and made notes on his answer.
“I think what we’re seeing here is a board committed to seeking a different path,” Chairman Efren Carrillo said in his closing remarks.
The board’s vote gave direction to staff to implement the package of proposals. The first proposal to return to supervisors will be the tighter debt limits, due back in January.
At that time county staff members are set to review a similar set of proposals put forward last month by Gov. Jerry Brown. That overhaul effort would affect county employees as well as state workers, city employees and teachers. Parts of it could go voters next November.