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WatchSonoma Watch

Sonoma County pensions to cost millions more

By BRETT WILKISON
THE PRESS DEMOCRAT

A 42 percent spike in unfunded pension promises could further drive up taxpayer contributions to Sonoma County’s retirement fund, with costs jumping by a third next year and going up by millions more each year through 2017.

The projected increases, triggered mostly by investment losses, were contained in a pair of sobering reports accepted Wednesday by the board of the $1.87 billion county government pension system.

They signaled a continued climb in annual county pension contributions — from $42 million now to $57 million starting in mid-2013, according to county estimates.

And they detailed a sharp, one-year rise of $104 million in the pension system’s long-term unfunded obligations to retirees. The new total is $353 million.

County leaders and fiscal watchdogs said the presentation provided further impetus for an overhaul of the pension system to reduce the burden on taxpayers and relieve budget pressure on public services.

Since 2000, annual county pension costs including payments on pension bonds have risen more than 300 percent and are now at $87 million — about 19 percent of pay and benefits for the county’s workforce. Overall county pension costs are projected to double in 10 years without any action, county leaders have said.

“We have to make changes and we have to make them quick,” said Supervisor David Rabbitt, who also serves on the board of the Sonoma County Employees’ Retirement Association.

One labor representative at the meeting Wednesday questioned the need for a major overhaul, saying the reports provided only a snapshot of a recent shortfall.

Tom Drumm, with Local 1021 of the Service Employees International Union, the county’s largest employee group, said the retirement system has been sufficiently funded over the long-term and that a market rebound could make the fund whole again, reducing taxpayer costs.

“I’m not convinced,” Drumm said of the need for large changes.

One of the reports — the actuarial valuation — gave an end-of-year measure of pension fund assets versus obligations owed to current and future retirees. For the county and two smaller government employers in the retirement system — Valley of the Moon Fire District and Sonoma County Superior Court — the figure is a key factor determining what they must pay into the pension system in the future.

Last year, the report showed a $154 million drop in unfunded liability, due largely to the $289 million in pension bonds sold by the county in 2010. The funding boost reduced the required county contribution in 2011-2012 by about $3 million.

Deferred investment losses, along with other factors, are now reversing that one-year drop and driving up taxpayer costs.

The investment losses come mostly from 2008, when the pension fund lost $670 million in a stock market freefall, as well as from 2011, when flat earnings resulted in a loss of $140 million.

For 2011, the total loss recognized by the retirement fund was $125 million — offset by smaller investment gains in 2007, 2009 and 2010.

“It’s been a tough last decade because of all the changes in the market and in the economy,” said Gary Bei, administrator of the Sonoma County Employees’ Retirement Association, which represents about 8,000 retired and current employees.

Smaller-than-expected salary increases proved the only major offsetting factor for taxpayer costs in 2011. That trend held down the spike in unfunded liability by about $30 million.

The other report presented Wednesday showed unfunded liability for the county system soaring as high as $572 million by 2015, a rise that would drive up taxpayer contributions by millions through 2017.

County leaders said the report was alarming.

“We knew this was coming, although I think it was a little worse than anticipated,” said Rabbitt.

Fiscal watchdogs said the reports showed the need for significant pension system changes, including measures affecting current employees. Those changes are seen as the fastest way to achieve savings, but have frequently fallen to legal challenges in California.

Changes the county is pursuing in contract talks and in revisions to state law include capping benefits for all employees, scaling back pension spiking created through extra pay and perks, reducing benefits and raising the retirement age for new employees and increasing public oversight of the pension fund.

County Administrator Veronica Ferguson urged employee groups to acknowledge the need for those measures.

“Are we in triage mode today?” Ferguson said. “We’ve identified (the pension issue), we’re working on it … Hopefully they’re willing to address it in negotiations.”

Labor representative Drumm said his union has shown a willingness to discuss pension changes at the bargaining table.

The reports presented Wednesday did not propose increases for employee contributions into the pension system. State law governing county pension systems shields employees from increases driven by past investment experience.

Currently, county employees pay among the highest rates into their retirement among their state and local government colleagues, with about 12 percent of their paychecks going to pensions. Along with deductions from the fire district and court employees, that equated to just over $37.3 million in the calendar year 2010, according to county pension system records.

You can reach Staff Writer Brett Wilkison at 521-5295 or brett.wilkison@pressdemocrat.com.





33 Responses to “Sonoma County pensions to cost millions more”

  1. Melanie says:

    I will clarify my point a little further.

    If you are an engineer or scientist you are not going to choose a county job at lower comparative pay unless there are some decent benefits.

    They already have trouble finding qualified and experienced people to fill those jobs.

  2. Skippy says:

    “You have the right to organize.”

    Thanks for the permision.
    We have been, we are and we will.
    Sincerely,
    The Tea Party

    ps buh-bye Sen. Lugar!

  3. Huston, We have a Problem says:

    The issue is not whether employees work hard. The fact is that the level of pay and benefits, including pension benefits, are not sustainable. The issue is also not limited to Sonoma County. (see link to PERS article below)

    http://calpensions.com/2012/05/09/calpers-actuaries-state-rate-up-213m-to-3-7b/

  4. Big jim says:

    @I’m just sayin’

    You have a point about organizing. I unfortunately am not a retired public employee and don’t make more in retirement than when working, and in fact am at work at 7:30am on conference calls with Europe, trying to make a living and pay my taxes. I don’t have the time to attend these meetings, and naively expect the elected representatives to represent the taxpayers, not just the special interests. I suspect that most taxpayers are in the same boat of having to work and don’t have an organization to represent us – certainly the political parties don’t: Demos = Public Employee lackies, Republicas = 1% lackies.
    No one seems to be loudly representing taxpayers, but everyone feels entitled to ask them for more to pay for their pet project or entitlement. The problem here is that this unbalance has led to unsustainable give-aways to public employees, particulary Public Safety and Management, that are squeezing out government services. The recipients of these excesses are unwilling to see the light. Union bought politicians “negotiating” with them won’t get us anywhere. The Dems are busy blocking city’s ability to resolve these unbalances in bankruptcy, so they are pushing us into a more radical solution, like eliminating Public Employee Unions!
    We need real change and a representative for the taxpayers, not the entitled Public Employees and retirees and their union mafia.

  5. I'm just sayin' says:

    @Follower

    You have the right to organize.

    Your failure to exercise that right does not mean you have the right to take it away from others for the purpose of re-balancing power.

    For every example you give me of a politician caving to a “public employee union”, I can give you another example of a politician caving to another special interest group. Time and time again, the way the politician leans on an issue is directly proportional to the number of phone calls, emails, letters, and other correspondence they receive from the group they lean to.

    I attended all of the Santa Rosa Mayor’s Pension Reform task force meetings. They were open to the public. But the public did not show. The task force itself had a fairly even mix, but the audience seating area was less than half filled and, of those that did show up, they were predominantly union retirees or silent observers.

    But now, in this forum, I hear all of the armchair quarterbacks out there complaining that the politicians, who did get some minor concessions from the unions, failed to represent them. These bloggers are throwing their popcorn and drinks at the players on the field suggesting they were beholden to the unions all along…among other things.

    Don’t get me wrong…I’m right there with you brother. Although I attended all the Pension Reform meetings, I failed to speak up. It was my first time attending a public meeting. Perhaps it was the 7:30am start times that kept my activist voice from emerging.

    Up until then I was an armchair quarterback, too. Not any more.

  6. Melanie says:

    I would like to say that I work for the county. I have a masters degree, a professional title and a very physical and cognitive job. I could work privately, but I believe in serving a larger population of people, and that means county service.
    It is disappointing to see this debate and these accusations, some from people who really don’t seem to know the scope of services that are provided, the type of people who work for the county, the comparative pay, hours of education and heart-felt service that goes into some jobs.
    My union has managed to save me from even more furlough days, pay cuts and negotiated for healthcare coverage.
    As for pension, I was a lot happier with CalPERS but this county reinvented the wheel, so they have a big mess to deal with.
    Nothing is in great shape for this generation.

  7. Tom Lynch says:

    The reality is that this issue, with massive unfunded retirement costs, is due to promises made that cannot be kept…it is impossible to fund that which has been promised.

    This is not a fight against public employees, or unions or retirees; it is about math. Most businesses, including those that are trade union shops, pay a salary and benefit for an employees service the year given; and that’s it. No further responsibility on the part of the employer if the investment portfolio does not perform as expected.

    With state, county, local, special districts and legal monopolies (PG&E, etc.,in addition to salaries for one years service, the benefits, especially retirement, if not fully funded for that years service, can be paid over the next 20-30 years by the next generation of taxpayers and employees.

    If the retirement fund doesn’t get a ridiculous 7.75% return,and instead gets a 1% return (like Sonoma County’s five year average); the taxpayers are responsible to pay the 6.75% difference over the next 20-30 years.

    Imagine Mead Clark Lumber saying to their employees,”Sorry guys, your pension portfolio failed to get a 7.75% return last year but got a 1% return instead. Don’t worry, we’re taking out a loan over the next twenty years at 7.75% to make up the diffence, as we have for the last four years.” They would be bankrupt in a heartbeat with scores of jobs lost.

    This is a catastrophe of epic proportions that our elected officials, union heads and management have become willfully blind from solutions. In order to solve the problem we have to be able to honestly discuss and reinvent the system.

    http://www.tomlynchforassembly.com

    “Somebody has to do something, and it’s just incredibly pathetic that it has to be us.”
    ~ Jerry Garcia

  8. Follower says:

    @I’m just sayin’

    Classic!
    That wasn’t the question AND YOU KNOW IT!

    But you use the cute little liberal trick that all you libs use when you can’t defend your argument.

    CHANGE THE QUESTION!
    ….nice.

    No, PUBLIC employee unions are NOT the same as Private Sector Unions for which you offer a valid justification as did I in my post.

    Congratulations, you are indeed a Master of the Obvious!

    Now answer the actual question…

    Why do (now pay attention because this is the important part)

    “PUBLIC EMPLOYEES”

    …need Union protection?

    Did you get that?
    “PUBLIC EMPLOYEES”
    You know… “CIVIL SERVANTS”.

    People who are employed by the Government and paid directly from my taxes as opposed to people who work for a PRIVATE company that could and do replace them at any time for any reason.

    I’m all ears…

  9. I'm just sayin' says:

    @Follower.

    What valuable function do unions serve?

    Answer: The ability to put numbers behind a message.

    Why do politicians listen to them? Because they have the influence (i.e., numbers) to put them in office.

    In a democratic society, it takes numbers to change the status quo. Society has yet to rebel (i.e., organize) in a manner that creates change.

    The question we need to ask ourselves is why. Perhaps it’s because several of us believe it is up to the elected officials to effect change.

    If your frustration is “Politicians promise change and we elect them, and then change never seems to happen,” then you’re missing the point.

    We, the people, organize and effect change. If we don’t do this, then we have only ourselves to blame.

    Want to make a difference in a community. Then organize.

    Can’t get people to organize? Then that is a separate issue and one well worth investigating.

  10. RAW says:

    Since union activities fall under the First Ammendment, is FOLLOWER wanting to ban that, along with the unions? I’m just asking, right?

  11. Follower says:

    @I’m just sayin’

    “I’m not worried about the unions. Their already organized. And I’m glad they are…they serve a valuable function in society.”

    Really?

    OK, please explain too me exactly what “valuable function” Public Employee Unions “serve”?

    Exactly what employer abuses have Government Employees ever experienced that left them with NO RECOURSE (that is key here) other than Union protection?

    Private sector employees, OF COURSE! We have reams & reams of history showing in great detail exactly how Private Industry will abuse it’s employees if given the opportunity.
    But GOVERNMENT?

    Public Employee Unions are riding the backs of all the people who endured TRUE employer abuse during the Industrial Revolution.
    That level of abuse has NEVER existed in Civil Service and never will because Government Employees ALREADY HAVE PLENTY OF RECOURSE!

    It’s time to stop pretending that Public Employee Unions exist for ANY OTHER REASON than to raid the public coffers for over the top pay & benefits.

    It’s time to stop pretending that the Public Employee Union “playing field” is the same as Private Unions. It’s not!

    Private Sector Unions can only demand so much before they put themselves out of business (unless you’re GM).

    Public Employee Unions have no such concern.

    A CEO’s job is at risk ONLY if he gives too mush to the Union.

    A Politician’s job is at risk on if he gives TOO LITTLE!

    Lets put an end to this farce and BAN PUBLIC EMPLOYEE UNIONS.

  12. NOTUTOO says:

    California will spend approximately 85.71 billion during the fiscal year 2012. The percentage of residents on welfare in the California is now more than triple that of the rest of the U.S. While caseloads in the rest of the U.S. have dropped over 30% in the past five years, California’s has gone up about 6%. As a result, though it has only about 12% of the total U.S. population, California’s share of the welfare caseload has risen from 22% in 2002 to over 30%. There are more welfare recipients per family in California, and that number has crept upward in the past couple of years, perhaps indicating that California welfare mothers are bearing more children that those in the rest of the U.S. Estimates put about 25% of this welfare goes to illegal immigrants.

    Welfare amounts to over 30% of the california budget. Pension and salaries amount to less than 10%. And everybody wants to strip the workers of their “unsustainable” salaries and pensions?

  13. truth in news says:

    Why is it the working class has to pay for the welfare bums? Perhaps if we rewarded people for working for a living and penalized people who don’t work things would not be so bad. Seems like everyone wants to take from the workers and give to the nonworkers…socialism anyone?

  14. Steve Klausner says:

    Animal Farm.

  15. I'm just sayin' says:

    Accusations are plentiful around here, but accomplish nothing.

    There’s truth in what everyone is saying. And yet its delivered in such a way that dilutes it’s value to nothing.

    Be smart. Organize yourselves. There’s strength in numbers.

    I’m not worried about the unions. Their already organized. And I’m glad they are…they serve a valuable function in society.

    There’s several ways you could organize yourselve. Some organizations actually advocate the issues you are pointing out. Join them and let your voice be heard.

  16. Steveguy says:

    I say again, Mockingbird has it right !

    It’s the MANAGEMENT salaries, perks and pensions that are our ruin.

    Rank and file for the most part work and work well. We are actually losing great workers at the expense of the expensive.

  17. Steveguy says:

    Mockingbird makes great points here on this subject.

    I ‘almost’ got a job with the Water Dept years ago. Nepotism won out, and that’s OK I guess. ( I was top 3 on the tests, including physical tests like load sandbags, run a rough trail, and deposit). Best employment test I ever took, very challenging.

    Saying that, if I was a Water Agency Employee now, I would make decent money and have a modest retirement along with some Soc Sec. Decent meaning like $60-70 K, unless I advanced.

    It’s not our real workers and yet they take the brunt of the cuts !

    It’s these management people that have the power to waste taxpayer money, and they get paid EXORBITANT amounts ! They give it to themselves !!!!!!!!

    Don’t forget the contractors for all the ” studies” as some of them make way over $150,000 a year.

    Is anyone awake ?

  18. Steveguy says:

    Years ago, the perceptive people had noticed that these pensions and benefits are UNSUSTAINABLE.

    The politicians have known too, but prefer to kick the can down the road and cash in with all of the cronies.

    Well, the can is full of lead ( as asphalt and quarry material aren’t allowed) yet their toes does hurt, as those that support those that got us into this mess have ruined us. Yes, ruined.

    The American Dream is dead, sold to the Chinese for mere campaign contributions. Cheap campaign contributions at that !!!! Drop $10 K, they will pass your law, as long as you continue the money flow, and get everyone that benefits from taxpayer monies on board.

    And then when you reward others, you ‘retire’, and come back as another $150,000 a year taxocrat, with full benefits and a pension on top of that !

    Wasn’t Valerie Brown a $170,000 a year ‘consultant’ for the City Of Irwindale, that fleeced money and ‘study money’ to the tune of millions ? WHILE she was on the Board of Stupes ? ( history)

    The voters are the Stupes , they keep on voting on the ones that make their life worse.

    Our way of life is at threat here folks, and I am not some doom and gloomer, but holy moly we are not rational at the Government level, at all !

    Seriously, oh my

  19. MOCKINGBIRD says:

    Sweet Deal-you got it wrong. It’s not COUNTY EMPLOYEES, it’s county MANAGEMENT. Rank and file members don’t get 100% of their salary at 60. They have no way to pad their pensions. I will exclude the safety employees from this as they have access to overtime most other county employees don’t have.

    I’m sure the rank and file county employees WISH they had a county paid 401K and could pad their pension, but they can’t. They can put money into a deferred comp account but it ALL comes out of their paychecks-not one cent does the county put in. Most of them have to work until they can get Social Security. County employees pay into Social Security. Combine that with what they pay for their pension and health benefits and there isn’t much left to live on.

  20. Canthisbe says:

    Re-posted from March 25, 2012 at 7:08 pm “Pretty much everything that can be said about public employee salaries, pensions and health insurance and fire and police salary and pensions and health insurance in particular has been said ten times on the PD boards, in the press and on the internet. The public employee salaries and benefits are mathematically unsustainable. It doesn’t matter whether the public employee unions negotiated those salaries and benefits in good faith, in good times or whether they bought every politician with bribes. The public employee managements and unions are not ready to really contribute to solving the problem. (Agreeing to lower pay for “new hires” is virtually meaningless.) They hope they’ll get their money before the system collapses. The politicians lack the will to solve the problem. They are not about to give up their salaries, per diemes and pensions either. And it appears that they are not willing to go against the public employees unions that fund their re-elections. At some point, the ponzi scheme will collapse. The entire budgets of cities are close to being used up to pay public employee benefits. If you eliminate the deficit spending, some cities are already spending more than 100% of their budgets on employee salaries and benefits already. (See Healdsburg.) Everyone seems determined to get as much as they can until the whole scheme collapses of its own excesses into a massive disaster of bankrupt or defunct cities and counties and the State.”

  21. Sheryl says:

    @Bear Yes promises get broken. Just a few examples…Obama said he would have us out of the middle east…we are still there. He would leave the medical marijuana users alone….bust after bust here in CA. Guantanamo…closed immediately according to Obama, yet it’s still open. Promises get broken all the time.

  22. Jim says:

    Why does this stuff keep getting reported?
    CA has an unfunded liability over $500 billion. Santa Rosa has an unfunded liability over $100 million. The federal government has an unfunded liability in the trillions. What does it matter? Nothing will change. The figures just keep getting bigger. The idiots in government want to raise taxes. The con artist union reps say there isn’t a problem. Given the federal government (the Democrat controlled Senate) hasn’t passed a budget this year, but keeps spending anyway, what do the figures really matter?

    Pay attention to the next election. The same dopes will get re-elected. Governments will keep expanding. Deficits will keep growing. The same broken record.

    We all know Obama will raise taxes the second he gets re-elected. We know Brown wants to raise taxes. With taxes rising and CA being voted the WORST place to start a business (for the 8th straight year…we should be so proud of the Utopia the moron politicians have created!), jobs will be scare. I personally know 8 people who are being laid off because the companies they work for are leaving the state.

    Once again…max out your 401k to shelter income from taxes. Make a plan to leave this disaster of a state. Santa Rosa, Sonoma County and CA are just examples of what exists in every city, county and state. The house of cards will collapse eventually. Remember the “always increasing housing market”? Yeah, look how that turned out. The pension-caused collapse is next.

  23. Reality Check says:

    The fun thing about this very unfun subject is that every board candidate, in a long list of goals, pledges to “reform, solve, or fix” the public pension problem in some way.

    Ask for specifics, as I have, and it all gets murky. A couple offer a specific or two, but nothing more than trimming at the edges. If there’s anyone running in D1 who’s offered specifics more than tokenism, let me know. Otherwise, the choices are which will do the least harm. Why vote?

  24. Tom Lynch says:

    For five years now SCERA has averaged a rate of return of less than 1% while Sonoma County guarantees them a return of 7.75%. We have added $800 Million of “unfunded liability” that we have to pay back over the next 20 years at 7.75% or another $700 Million in interst.

    This $1.5 Billion debt over the next twenty years is equal to the total payroll of the last five years! $1 principal and interest for twenty years for each $1 of salary earned over the last five years.

    Plus Brett doesn’t include what the County pays in for “retirement benefits” that include over and above the 19% “pension benefit” another 7.65% Social Security, 7.5% retiree medical, 5-6% 401k for management and elected’s and more.

    http://www.tomlynchforassembly.com

  25. Sweet Deal says:

    GAJ,
    It is even more generous. County employees pay 10 – 15% towards their retirement and if they work 30 years can get more then 100% of their salary when they retire at 60. County employees also have a county paid 401(k) plan. Sweet deal and all at taxpayer expense.

  26. Weak says:

    “We’ve identified (the pension issue), we’re working on it … Hopefully they’re willing to address it in negotiations.”

    I hope so too. I also hope you have a plan for when your hope proves to be just that.

  27. I hope someone is watching says:

    Look who the local press and mailers are telling to elect! Same people that got us in this mess and they want our support again. VOTE THEM OUT! Its the only chance we have to get this ship sailing stright! Time for new leadership!

  28. Concern Taxpayer says:

    Bear, Your promises came from the politicians who your union got voted in and gave you raises.

  29. Green Feels Great says:

    bear and Mockingbird need to stop reading their SEIU propaganda and begin to open their minds to facts. The County is broke because the pension entitlement system is unaffordable and cannot be paid for by the county taxpayers.

    The County needs to immediately stop paying into their retirement system for any new employee. Existing employees need to be put into a 401k type program with the employee picking up the costs.

    Layoff 10% of the workforce in every department immediately. None of this “laying off open positions,” layoff real people.

    Freeze the wages and salaries of all managers and employees.

    If SEIU cries, decertify them. Then some semblance of order might be brought out of the current chaos.

  30. MOCKINGBIRD says:

    Okay, time for management to take a hit. Time for some of them to get laid off. Time for the ratio of staff to management to go up. Time for the county paid deferred compensation to stop, management merit pay discontinued because it isn’t being used for the reason it was designed for, that value of other perks aren’t pensionable and many should be eliminated. Let them use their own cell phones, cars to get to work, and pay for their own gas to get to work. In other words, the padding of pensions has to stop. This is MILLIONS of dollars in savings.

    No more “across the board”. Because “across the board” is not equal for the rank and file workers. They got hit with layoffs last time, while management kept their jobs and all their perks worth MILLIONS of dollars. Management jobs have actually been added since 2008. The BOS’s focus should be to preserve services to the community and that means preserving rank and file jobs since those are the workers who provide those services.

  31. bear says:

    Who did this analysis? The BOS? Don’t think so.

    It is a one time snapshot loaded with assumptions about future returns on investment, and slanted by the republican recession. Just take the worst financial year you ever had and assume it will continue forever.

    There should at least be an analysis of alternate economic scenarios.

    This is the republican strategy on the local, state and federal levels. Ironic when you consider they created the circumstances that they are now trying to exploit for political gain.

    Or is economic policy from 1981 to 2009 all Obama’s fault? I’m waiting for that ad to appear – when republicans go after Social Security, Medicare and everything else except defense spending, corporate subsidies and tax loopholes for the rich.

    Don’t forget that the recession and County actions have greatly increased the number of forced retirements over the past few years. While employee health insurance costs have gone up 70% a year – to the point that they now exceed this person’s mortgage by well over 50%.

    But no worries – there are ads on TV that show you how to get out of tax and credit obligations. For a minor fee.
    And I can just go to the emergency room for healthcare – YOU pay either way.

    An obligation is a promise made, or are we going to change that, too?

  32. Julie B says:

    I don’t want to “contribute” towards someone else’s pension, especially knowing that the money I’m putting in SSI won’t even be around when I’m ready to retire… Besides, contribute sounds like it’s an optional thing, when it is obviously not.

    There should be 401k accounts (or the like) in place for County workers to pay into fopr their own retirement, instead of draining the rest of the people in the county for money!!

    Tom Drumm sounds like a man who doesn’t care where his bread is being buttered, as long as he gets it when he wants it. Just bleed the taxpayers dry, right?

  33. GAJ says:

    Paying 12% of your pay to get a Pension of 60%+ of your highest years’ pay after 30 years is a mere pittance.

    The contribution rate for that kind of pension needs to be in the 20% neighborhood.