10:00 PM PDT on Saturday, May 1, 2010

The Press-Enterprise

Riverside County needs to bring its lavish public pension system back in line with financial reality. The county faces growing costs for retirement benefits at a time when budget shortfalls threaten public services. Supervisors should make changes that create a more affordable system and ease the burden on taxpayers.

A new report from the county’s Pension Advisory Review Committee puts the county’s retirement plan in stark context. The county has to find an additional $800 million over the next 30 years to pay for its pension promises, including the $375 million the county still owes on a pension bond from 2005.

The county will spend $155 million toward retirement costs in the current fiscal year, but projects that number will be $20 million higher by 2011-12. The increase would have been $65 million, except the state pension fund to which the county belongs did not recognize its investment losses of the last two years all at once. And the report predicts that county pension expenses will escalate in future years.

No wonder Supervisor John Tavaglione last month called the current pension structure “unsustainable.” Surging costs are troubling for a county already struggling with shrinking revenue. The county is $131.5 million short of the money that would cover $744 million in discretionary expenses next fiscal year, with every county department facing a budget cut.

The county offers richer benefits to most of its employees than other surrounding counties do — an approach Riverside County cannot afford to continue. County workers can accumulate pensions equal to 90 percent of their final salary, and retire at 50 for public safety workers and 60 for all others. But the county rules allow manipulations that can bring pensions worth 97 to 98 percent of a worker’s final salary. Some retirees collect Social Security, as well.

There is no legitimate reason taxpayers should fund public pensions far more generous than anything private-sector workers can expect. Reining in this county largesse would provide both immediate and long-term savings to the public.

County employees, for example, should cover a larger share of their own retirement expenses. Now, workers pay nothing after three to five years of employment; the county picks up all the pension costs. Requiring employees to pay just 2 percent of their salary toward pensions would save the county more than $21 million in 2010-11, the report says. In fact, the county should not be covering employees’ retirement contributions at all.

The report also notes that trimming the pension formula from 3 percent of salary for every year worked to 2 percent could save $120 million through 2020. The county could reduce costs even more, however, by raising retirement ages to private sector levels. And basing pensions on the final year of salary invites “spiking,” which artificially inflates retirement benefits. The state now bases most pensions on a three-year average of salary, and so should the county.

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