Tuesday, July 10, 2012 – 11:30 a.m.
Last Modified: Saturday, July 14, 2012 – 01:30 p.m.
The County of San Bernardino is about to take its turn in the pension bucket this year. A bucket likely to further pressure budget balancing measures.
The San Bernardino County Employees Retirement Association (SBCERA), the county’s pension fund, at its latest actuarial update, was underwater by $1.7 billion and climbing, according to county sources.
The amount is what is needed in order for the system to pay 100% of all its obligations.
As of March 31, 2012 the fund had just over $6.1 billion in assets.
Currently the fund is below the 80% funding level considered to be stable. A level projected to fall below 70% next year.
Of concern is the fact that recent investment performance is likely to worsen the situation.
In order to maintain and pay all obligations, SBCERA assumes it will earn 7.75% annually from its investment portfolio.
But in today’s financial climate that’s a lofty number, and any year that the fund misses that mark the underwater or unfunded number dramatically increases.
Something that’s only happened once in the past five years. As a matter of fact, through March of this year, the fund has an investment return of a meager 0.6% fiscal year-t0-date, and 1.0% over the past five years.
For example, on a $6.1 billion fund balance, a return of 7.75% would deliver $457,500,000 in that fiscal year.
Now imagine the fund earning zero or losing money as it continues to pay out existing benefits, while continuously incuring new obligations.
It’s likely, when the final numbers are tallied, the pension fund earned very little or lost money in its fiscal year ended June 30, 2012.
It should be noted that any pension fund at or below 40% funded is likely to be considered insolvent.