Published: 07 July 2012 06:12 PM

Pay raises for pension changes. To the Riverside County Board of Supervisors, it’s a fair — if costly — trade.

To get the county’s labor unions to agree to an overhaul of the public employee pension system, supervisors authorized more than $730 million in raises over the next four years. In exchange, officials expect savings of $856 million over the next 10 years as new employees earn lesser pensions and current workers pay more toward their retirement.

The raises are new expenses for a county that’s lost $230 million in tax revenue since 2007 and closes offices on Fridays to save money. The county laid off 229 employees this year to balance next fiscal year’s budget, and more job cuts are possible in the months ahead.

Supervisor Marion Ashley defended trading raises for pension changes.

“The big winners over the years are going to be taxpayers of Riverside County, because we’re going to have more money to provide for services,” he said.

David Lewin, a professor at UCLA’s Anderson School of Management, said it’s not unusual for local governments to offer raises to cut pension costs, although it normally happens during more prosperous economic times.

Barbara Olivier, the county’s human resources director, said getting pension reform was challenging because legally, the county can’t take away a public employee benefit once it’s offered. The county’s largest unions — Service Employees International Union Local 721 and Laborers’ International Union of North America Local 777 — joined the union representing deputy district attorneys to initially oppose pension changes, she said.

SEIU representatives declined comment, and LIUNA Business Manager Stephen Switzer did not return a phone call seeking comment.

Benefits Boosted

The county’s pension system now has $4.7 billion in obligations to current and future retirees and $4.2 billion in assets, mostly stocks, bonds and similar investments.

Revamping the system was a top priority for supervisors, who worried that rising pension costs would consume money for essential services such as police and firefighters. Annual pension expenses were predicted to reach $300 million by 2020, roughly half the portion of the county budget directly controlled by the five supervisors.

The system was over-funded by $144 million in 2001, right around the time supervisors boosted pension benefits for law enforcement and other employees. The Riverside Sheriffs’ Association lobbied for the increase on the grounds it would attract and keep quality deputies.

About a decade ago, officials with the California Public Employees’ Retirement System said Wall Street gains would more than cover the added benefits, county Chief Financial Officer Ed Corser told supervisors last month.

But the stock market tanked, and cities and counties that were invested in CalPERS — Riverside County included — were forced to cover losses. CalPERS recently lowered its expected return rate on its investments, adding as much as $28 million to the county’s short-term pension costs.

Unions represent 92 percent of the county’s nearly 18,000 employees, and supervisors needed their consent to change pension benefits. Frustrated by the slow pace of contract talks, supervisors last year imposed cuts to wages, pensions and other benefits on SEIU and the sheriff’s union — about 8,300 employees altogether. SEIU responded by holding a one-day strike in January.

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