11:14 PM PDT on Monday, May 3, 2010

The Press-Enterprise

Riverside County’s annual pension costs are expected to jump $20 million by 2012, putting a further strain on a budget that over the next two years is expected to contain significant cuts.

A new report headed before the Board of Supervisors today found that the county’s pension plan has deteriorated due to recent investment losses.

In total, the county is about $800 million short over the next 30 years of having the money needed to cover its $4.5 billion in pension obligations.

“This dwarfs our current budget crisis,” Supervisor Bob Buster said in an interview last week.

The report from the Pension Advisory Review Committee comes as supervisors weigh how to overcome a $131 million budget gap for the fiscal year starting July1 and as a newly formed — and similarly named — committee on Monday debated potential retirement reforms.

Supervisors in March created the new group, called the Pension Reform Advisory Committee, to make recommendations by Sept. 1. The committee consists of officials from the county executive office, human resources and members of the county’s key labor unions.

Buster and Supervisor John Tavaglione have called the current system unsustainable.

For four hours on Monday, the group discussed the new pension report, the complexities of pensions, and the scope of the new committee.

Daryl Drott, member of the Riverside Sheriff’s Association, said pension contributions are made over decades and it would be ill-advised to make knee-jerk reactions.

‘Emotional Topic’

“It’s an emotional topic that people have taken out in the public and are trying to use it for political gains,” he said.

Riverside County’s pensions are managed by the California Public Employees Retirement System, or CalPERS.

The new report concludes that the county’s pension costs will increase by $20 million to $175 million by fiscal 2010.

Meanwhile, the county’s unfunded liabilities as recently as last month were estimated at about $600 million. High unfunded liabilities can result in more volatility, meaning in the future the county might have to contribute more each year or hope for higher investment returns, the new report concluded.

Still, the county has accounted for 86 percent of its total pension costs, a position considered relatively favorable, the report states.

And any changes in the retirement program would likely affect new employees, resulting in only modest savings toward the county’s current budget shortfall.

Second Tier

Supervisors tasked the new committee with only looking at changing benefits for new employees, although some committee members suggested the county look into what current workers receive.

Creating a second tier of lower benefits for new employees is the pension-reform option that has received the most discussion. Others include requiring employees to contribute more of their own money toward their retirement.

Public safety employees currently can retire at age 50 and receive 3 percent of their pay for every year of service with the county. Other employees receive 3 percent at age 60.

Creating a second tier and changing the public safety benefit to 2 percent at age 50 would generate $22 million in total savings by 2020. Changing the plan for other employees to 2 percent at age 60 would create $98 million in total savings.

Buster, a proponent of pension reform, said creating a second tier is a move the county must move quickly on. Pension costs are an “ongoing threat to all of the county’s basic services,” he said.

But a second tier would produce only modest savings toward the county’s current budget crunch.

According to the report before supervisors, a new tier would create about $2.6 million in savings for the fiscal year starting July 1 and about $5.1 million in fiscal 2012.

Myopic View

Steve Matthews, the regional director for the Service Employees International Union Local 721, is a member of the newly formed pension committee.

He said changes do little on the immediate financial problems.

“We are looking at this in a myopic way,” he said during Monday’s pension committee meeting.

If the county moves to change the county’s pension plan without looking at wages, health care and other benefits, employees could be put at a disadvantage, he said.

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