A 42 percent spike in unfunded pension promises could further drive up taxpayer contributions to Sonoma County's retirement fund, with costs jumping by a third next year and going up by millions more each year through 2017.
The projected increases, triggered mostly by investment losses, were contained in a pair of sobering reports accepted Wednesday by the board of the $1.87 billion county government pension system.
They signaled a continued climb in annual county pension contributions — from $42 million now to $57 million starting in mid-2013, according to county estimates.
And they detailed a sharp, one-year rise of $104 million in the pension system's long-term unfunded obligations to retirees. The new total is $353 million.
County leaders and fiscal watchdogs said the presentation provided further impetus for an overhaul of the pension system to reduce the burden on taxpayers and relieve budget pressure on public services.
Since 2000, annual county pension costs including payments on pension bonds have risen more than 300 percent and are now at $87 million — about 19 percent of pay and benefits for the county's workforce. Overall county pension costs are projected to double in 10years without any action, county leaders have said.
"We have to make changes and we have to make them quick," said Supervisor David Rabbitt, who also serves on the board of the Sonoma County Employees' Retirement Association.
One labor representative at the meeting Wednesday questioned the need for a major overhaul, saying the reports provided only a snapshot of a recent shortfall.
Tom Drumm, with Local 1021 of the Service Employees International Union, the county's largest employee group, said the retirement system has been sufficiently funded over the long-term and that a market rebound could make the fund whole again, reducing taxpayer costs.
"I'm not convinced," Drumm said of the need for large changes.
One of the reports — the actuarial valuation — gave an end-of-year measure of pension fund assets versus obligations owed to current and future retirees. For the county and two smaller government employers in the retirement system — Valley of the Moon Fire District and Sonoma County Superior Court — the figure is a key factor determining what they must pay into the pension system in the future.
Last year, the report showed a $154 million drop in unfunded liability, due largely to the $289million in pension bonds sold by the county in 2010. The funding boost reduced the required county contribution in 2011-2012 by about $3 million.
Deferred investment losses, along with other factors, are now reversing that one-year drop and driving up taxpayer costs.
The investment losses come mostly from 2008, when the pension fund lost $670 million in a stock market freefall, as well as from 2011, when flat earnings resulted in a loss of $140 million.
For 2011, the total loss recognized by the retirement fund was $125 million — offset by smaller investment gains in 2007, 2009 and 2010.
"It's been a tough last decade because of all the changes in the market and in the economy," said Gary Bei, administrator of the Sonoma County Employees' Retirement Association, which represents about 8,000 retired and current employees.
Smaller-than-expected salary increases proved the only major offsetting factor for taxpayer costs in 2011. That trend held down the spike in unfunded liability by about $30 million.