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Retirement System A Go-Go

County Employee Program 72 Percent Funded


Thursday, November 8, 2012
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The county’s employee retirement system is 72-percent funded, according to a report given by chief Gary Amelio to the Board of Supervisors Tuesday. In fiscal year 2011, the value of the plan assets was $2 billion and the unfunded accrued liability was $2.7 billion, leaving $741.9 million in unfunded liability. In 2008, the plan was more than 88-percent funded, but dropped, along with the economic collapse, to 75-percent funded in 2009. Still, there is reason to be optimistic. Members contributed $10.8 million, the county contributed $94 million, and the plan got $350.8 million in investment return. “I don’t think the problem is too big to fix,” Amelio said. “We’re fixing it every year.”

Statewide pension reform will also begin to impact employer contribution to the fund, which will start to decrease as the reform kicks into place. The pension reform applies to employees hired after January 1, 2013. Currently, the county’s 3,507 retirees on average receive $2,817 in monthly benefits. The average age of those retirees is 69.3 years old. The reform, among other things, will switch the formula for general employees to 2 percent at age 62, and 2.7 percent at age 57 for public-safety employees. There will also be a cap on pensionable income, and some items of compensation are no longer pensionable.

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I'd like to ask you a question Chris. Have you ever looked into how much money our BOS shorted the retirement system in payments over the years via "pension payment holidays"?? What percentage of funding would we be at now if they hadn't shorted the system?

One more thing. I believe your 72% number reflects non-public safety employees. Last I heard the public safety portion is separate because of a different formula and is at a higher percentage of funding. If true shouldn't that be published as well?

Validated (anonymous profile)
November 8, 2012 at 3:35 p.m. (Suggest removal)

@Validated ... you can find the SBCERS annual report for FY2011 here:

http://www.countyofsb.org/sbcers/

On p4, it says SBCERS pension members include all employees of SB County, SB Superior Court, and 9 districts (various cemetary districts, APCD, etc.).

On p22, five different retirement plans run by SBCERS are listed. Each plan has different contribution rates & formulas. Based on the plan names, it looks like two of them are for public safety employees:

- Safety Plan 4
- Safety Plan 6

So it appears SBCERS pools the assets from all five plans and invests them in a single portfolio. The FY2011 annual report (ends 6/30/2011) says the "Funded Status" is 73%.

The pension fund's return was 21.8% which is consistent with how the markets did during those 12 months. Anyone who had idle cash sitting on the side during that period really missed out.

EastBeach (anonymous profile)
November 9, 2012 at 12:07 a.m. (Suggest removal)

I decided to compare the funding levels of some pensions, both public and private, that might be of interest to locals.

All info is from the latest annual reports. Here's what I dug up.

ATK, 71%
CALSTRS, 71%
CALPERS (PERF), 83.4%
Catepillar, 68%
Raytheon, 72%
SBCERS, 73%

ATK is Alliant Tech in Goleta, CALSTRS is the CA teachers pension, CALPERS/PERF is the CA state pension (PERF is their largest plan), Catepillar is the tractor company (not local but I had to stretch to think of a private-sector company with a pension), Raytheon is in Goleta, and SBCERS is the SB County pension.

I am not expert at accounting, but all of these companies use an actuarial method to estimate their pension plan assets. I suspect they aren't all the same, so there's a little wiggle room there ... maybe macintosh-to-fuji.

Hint: When you search an annual report for the pension funding level, look for the key phrase "funded status".

EastBeach (anonymous profile)
November 9, 2012 at 12:29 a.m. (Suggest removal)

Forgot to include another private-sector company with a pension in Goleta ...

Lockheed Martin, 67%

EastBeach (anonymous profile)
November 9, 2012 at 12:41 a.m. (Suggest removal)

It doesn't look too bad when the investment returns are good. But the investment risk (as well as the gain) should be on the employee, not the government. If those returns turn around, suddenly the system looks very sick, and the government entities are left holding the bag.

Botany (anonymous profile)
November 9, 2012 at 7:16 a.m. (Suggest removal)

But Botany, that is the fundamental point of a "government pension"! 30 years ago it was generally accepted that if you worked for the gov't, you were paid less vs. private sphere but your pension was more reliable (defined benefits) if not higher. When people, friends of mine, led their life based on that and now folks like you, 100% bottom-line materialists, want to change it that is not only illegal but immoral. Further, do not blame these gov't employees if in the meantime their wages went up and some in private industry went down. Honor the government's commitment: and it was extended by Republicans and Democrats on the various negotiating entities. Maybe fools from your hate-the-gov't point of view, but bipartisan fools who gave away the store.

DrDan (anonymous profile)
November 9, 2012 at 7:51 a.m. (Suggest removal)

DD - That was the case at one time when employees in the private sector were paid more than those in the public sector. Clearly, this is no longer the case. In fact, in some cases, public employee salaries exceed those in the private sector by a substantial amount. Don't forget that public employee pensions are based on the salary earned at the time the employee retires.

Investment risk is just one reason to put that risk (or benefit) on the employee rather than the state. The other is the political pandering that public pensions foster. It's so easy for a politician to pander to a union by increasing retirement benefits for public employees. The politician may get some votes out of it and all the expense is long after they have left office. If a politician wants to pander to unions in this manner, the expense should be up front while that politician is still in office.

Botany (anonymous profile)
November 9, 2012 at 8:04 a.m. (Suggest removal)

Botany, private sector salaries are still higher than public sector salaries.

If you have sources that suggest otherwise, can you provide them?

SBthinksso (anonymous profile)
November 9, 2012 at 9:54 a.m. (Suggest removal)

Public employee salaries do not exceed private sector salaries when they are compared by level of education. Do not repeat this idea that since the economy and GOP policies have decimated the working class forcing the private sector wage slaves to work for minimum wages that this is what everyone should get paid. This is propaganda directed at the working people and benefiting only the speculator class.

RHS (anonymous profile)
November 9, 2012 at 10 a.m. (Suggest removal)

Let's keep in mind that all current employees have vested rights to previously negotiated terms agreed to during negotiations. Going to a 401K (risk on the employee's back) for current employees will never happen.

The newly enacted pension reform still is defined benefit and law of the land. The problem is nothing is good enough for the GOP greed machine. They want ALL pension systems to be 401K style so they can make millions while risking the public sector workers future. I feel for the private sector employees that were ripped off by these monsters.

Validated (anonymous profile)
November 9, 2012 at 10:57 a.m. (Suggest removal)

Botany, if you read the 3 posts above this one you will see you are wrong about public employee salaries being higher than private salaries. Further, sometimes when gov't sweetens the pension deal they do it to avoid a salary increase at that time, another government expense. An e.g. is SB Police and Fire Depts., at several junctures the City of SB [both Demos and Repubs on the City Councils!] did not give them any sort of meaningful raise BUT kicked the can down the road by sweetening their pension deals. Who was hollering about that at the time?? Don't blame the cops and firemen for this, they accepted less salary for a better pension deal down the road. Now we are down the road and this is an issue.
When you mention "the political pandering that public pensions foster" I agree that this can be a problem.

DrDan (anonymous profile)
November 9, 2012 at 11:22 a.m. (Suggest removal)

I like this study because its done by a reputable organization, is specific to California, and is relatively recent.

http://www.irle.berkeley.edu/research...

The conclusion is that when you take into account variables like employee age, education, skill level, gender, benefits, etc., workers in the private sector are paid more.

For those interested, this is a very interesting study of private/public compensation in the UK. Their situation is different than here in the US, but I like how this study emphasizes the need to account for variables so you can do an apples-to-apples comparison:

http://www.guardian.co.uk/news/databl...

The UK study also illustrates how important it is to understand your data (e.g. employees of recently nationalized banks were counted as "public" employees and skewed the salaries of public-sector employees as a group).

EastBeach (anonymous profile)
November 9, 2012 at 4:54 p.m. (Suggest removal)

@Validated ... I agree that on the whole, the use of 401(k)'s as a way for Americans in the private sector to save for retirement has been a dismal failure. Many economists and public policy analysts have written about this.

Libertarians would disagree because it's "every man for himself" and "the market knows best" for them. But many, possibly a majority of Americans, simply lack the skill, knowledge, and discipline to invest on their own. That makes them easy targets for the financial institutions who have zero fiduciary responsibility for their account holders and who have siphoned off huge amounts in fees in the dark.

If we're going to keep going down this route (hopefully not) we should at least have required education in personal finance at the high-school level.

EastBeach (anonymous profile)
November 9, 2012 at 5:14 p.m. (Suggest removal)

thanks EastBeach for these webrefs, esp. berkely.edu, they help make the case that public workers aren't paid more.

DrDan (anonymous profile)
November 9, 2012 at 5:42 p.m. (Suggest removal)

Berkeley, huh, there's an objective source for you. How about the CBO, will you accept those numbers? It shows federal employee compensation to be higher than the private sector in evry category except at the PhD level. Sorry guys, time to eat some crow here.

http://www.cbo.gov/publication/42921

Botany (anonymous profile)
November 9, 2012 at 10:51 p.m. (Suggest removal)

EB - I like your rationale. People are too stupid to think for themselves so they need to government to think for them.

Botany (anonymous profile)
November 9, 2012 at 10:54 p.m. (Suggest removal)

Um, Botany? That higher "compensation" includes the benefits. The wages are clearly NOT higher for those with a college degree.

SBthinksso (anonymous profile)
November 9, 2012 at 11:30 p.m. (Suggest removal)

Yes, that's correct. Salaries for college graduates are about the same as those in the private sector, but the benefits bring the total compensation package to a level above that in the private sector. Those with some college or no college clearly make more both in salary and benefits than those in the private sector.

Botany (anonymous profile)
November 10, 2012 at 4:21 a.m. (Suggest removal)

Botany, you claimed earlier that public sector employees were paid more. Your own chosen source shows this to be false for most categories. Sorry.

SBthinksso (anonymous profile)
November 10, 2012 at 7:25 a.m. (Suggest removal)

SBthinksso ya gotta see that this Botany wriggles and twists and turns... there's no real dialogue going on and he'll cite various numbers all the time in order to keep himself hypnotized. Botz is unable to answer my question, don't we now have to "honor the government's commitment" to those who've got these public pensions and have lived under its terms for , say, 30 years, and now want to count on their public pension?? He can't address this.
And I am on record that the exorbitant public pensions should be capped, say at $90,000 per year. This is fair in a way since Prop 30 will now tax Botany's group, those making more than $250,000 per year, at a higher rate for the sake of children and education.

DrDan (anonymous profile)
November 10, 2012 at 10:53 a.m. (Suggest removal)