For the second time in two years, officials overseeing the pension system for Sonoma County government have lowered the fund's projected rate of return on investments, a move that will increase taxpayer costs in the short term but is intended to reduce long-term market-driven shortfalls.
The quarter-percent change, to a new rate of 7.5 percent, will trigger a roughly $50 million spike in the county's pension underfunding, now set at $353 million.
It also will trigger a $4.6 million increase in annual contributions by taxpayers to the system. That represents a 4.9 percent increase on the county's current annual pension costs of $94 million, including payments on pension bond debt. The increase will be phased in over three years beginning in mid-2014.
The shift comes at a time of increasing focus on the rising cost of public pensions, which critics say sucks money from county services.
It also comes amid continued debate over pay and benefits for county employees. State-mandated pension changes this year and a slate of county proposals subject to negotiation are geared to curb rising pension costs, up 400 percent for taxpayers since 2000.
Not all of the annual increase in contributions will be borne by taxpayers. County employees and workers in several affiliated agencies will see an increase totaling $680,000, or 1.9 percent, in their annual contributions.
The board overseeing the county retirement system made the change at a Jan. 17 meeting. Supervisor David Rabbitt, who serves on the pension board, announced the shift at a Board of Supervisors meeting this week.
In an interview, Rabbitt called the decision "a move in the right direction," while suggesting a sharper reduction would have been in order.
Stock market losses have driven much of the rise in annual pension costs for taxpayers, prompting fiscal watchdogs to call for investment changes that would reduce risks for taxpayers, including lower projected earnings rates in the range of 4 to 6 percent.