10:00 PM PST on Tuesday, January 26, 2010

By DUANE W. GANG
The Press-Enterprise

Riverside County might have to lay off as many as 1,600 employees over the next two years as it grapples with a $71 million budget gap, officials said Tuesday.

But to lessen the blow, supervisors voted to extend an early retirement offer to more than 3,500 employees, despite concern from two members that the plan adds to the county’s future pension costs and hurts future taxpayers.

Fewer layoffs will be needed depending on how many employees accept early retirement.

Although supervisors took a step toward solving the county’s fiscal woes during more than two hours of debate, they delayed key decisions on the extent of cuts to county departments and how to overcome losses in a special sales tax earmarked for public safety.

Chief Executive Officer Bill Luna presented supervisors with three scenarios for cuts. They will take up the issue again Feb. 9.

“We have to stop the bleeding,” Luna told supervisors. “We have to start nailing down where we are.”

The recession has taken a major toll on Riverside County over the past two years as property- and sales-tax revenues have plummeted.

Discretionary revenues — which supervisors have control over — for the current fiscal year are expected at $609 million, while ongoing expenses are $680 million. The $71 million gap must be closed by the end of the fiscal year June 30.

At the same time, the county has drawn down its reserves by more than $200 million over the last two years to $147 million.

Supervisor Jeff Stone described the financial picture as the “most heinous budget this county has ever seen.”

Early Retirement

Supervisors voted 3-2 for the early retirement program.

“We have no choice but to cut back,” Supervisor John Tavaglione said. “The county organization needs to downsize.”

Tavaglione said the county must mitigate layoffs with the voluntary early retirement offer. Those close to retirement often have established lives and will still have money coming in, he said.

Massive layoffs would likely affect younger workers, who might still be raising children, Tavaglione said. Laying off more of those workers would hurt the local economy, he said.

But supervisors Stone and Bob Buster questioned the early retirement program and how it could hurt the county’s ability to rehire workers once the economy rebounds. They both voted against early retirement.

“We have been very good to our employees in government,” Stone said. “They have the most lucrative pension system known to man.”

Buster said he didn’t think the early retirement was fair to the taxpayers in the future.

“Our pension costs are going up already,” Buster said in an interview. “The most straightforward choice is to lay people off rather than offer bonuses to people to retire early.”

The early retirement program provides two years of additional service credit with CalPers, the state pension system, as an incentive. For example, if an employee has 18 years, he or she could retire now with the equivalent of 20 years of service. The extra credits add to the county’s pension liabilities.

The county’s accrued pension liability is currently $4.5 billion, including about $600 million in unfunded liabilities, officials said.

The early retirement program would apply to employees 50 and older who have at least five years of credit with CalPers.

Employees must leave between Feb. 11 and Aug. 9.

The program would not apply to elected officials, the county CEO, public safety employees or flood control, parks, waste and special district workers.

Based on how many employees accepted a prior early retirement offer, county officials expect 15 percent of eligible employees would participate. That amount would reduce the county work force by 527 positions. In total, the county has 17,600 workers.

The county would have to pay an estimated $22 million to cover the extra service credit in CalPers and another $10 million for unpaid vacation and sick time, whether an employee is laid off or retires early.

The county would save $46.4 million a year, provided that none of the positions are refilled.

Proposed cuts

Meanwhile, Luna presented the board with three options for trimming the county’s budget.

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