SBCO

Tuesday, June 28, 2016 – 09:00 a.m.

San Bernardino County is set to approve a $203 million payment to its pension fund on Tuesday.

Surprisingly it’s an amount that’s lower than last year.

The payment amount is smaller, even though the county pension fund, San Bernardino County Employees Retirement Association (SBCERA), missed its actuarial required return of 7.5% in its last fiscal year.

The pension fund’s lagging performance has impacted the county contribution amounts each year until now. The fact that the 2016 contribution is $6.5 million less than what the county paid to SBCERA in 2015 is somewhat puzzling to say the least. I’m sure the county and pension fund will chalk it up to an actuarial anomaly or adjustment in an assumption.

Currently the fund, with $8 billion in assets, has an approximately $2 billion hole.

Here’s the SBCERA investment performance taken from the funds website. Remember the fund needs to earn 7.5% annually:

Annualized Returns as of March 31, 2016*
(Performance shown is Gross of Fees)

QuarterFiscal YTDOne YearThree YearsFive YearsTen Years
SBCERA-0.1%-3.6%-1.4%4.9%6.2%4.5%
S&P 5001.3%1.5%1.8%11.8%11.6%7.0%
BC Aggregate3.0%3.7%2.0%2.5%3.8%4.9%

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With the exception of this year. The county annual contribution amount has been skyrocketing since the Great Recession. Here’s a historical perspective of county pension costs:

Fiscal      Contribution
Year        Amount
2016/17     $ 203,790,595
2015/16     $ 210,317,923
2014/15     $ 182,185,164
2013/14     $ 172,478,057
2012/13     $ 154,626,037
2011/12     $ 132,263,097
2010/11     $ 106,060,340
2009/10     $  83,923,320
2008/09     $  78,765,000  

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The current SBCERA fiscal year ends on Thursday, June 30. It’s likely that not only will the fund not meet the 7.5% actuarial return hurdle, it’s possible the fund will suffer an actual negative return.

Expect county pension costs to rise sharply again next year.