Sonoma County seeks help to cut pension costs

Rising pension costs for Sonoma County’s 4,000 employees - expenses that critics say siphon taxpayer dollars from essential public services like parks and roads - have sparked a new debate about the need for citizen oversight of spending on the county’s public employee retirement system.

Supervisors have long acknowledged that the county’s total retirement costs - up more than 500 percent since 2000 - are on an unsustainable ascent.

And while the Board of Supervisors since 2011 has taken strides to curb rising pension dues borne largely by taxpayers, supervisors said Tuesday that the county must do more to reduce the cost of the retirement system and build public trust in the county’s fiscal management. Without more significant reforms, costs will continue skyrocketing, supervisors said.

In response, the Board of Supervisors over the next month will recruit people for a new citizens oversight committee to review the county’s accounting practices on pension matters and help identify ways of lowering total pension costs - now at $105 million per year, including payments on pension bond debt.

“We need to constantly challenge ourselves to reduce costs,” said Supervisor David Rabbitt, who is also on the board of the Sonoma County Employees’ Retirement Association.

Fiscal watchdogs and taxpayer advocates who have strongly criticized the county’s soaring pension costs applauded the move. They argued that increased scrutiny from people without a financial stake in the county’s retirement plans can help balance out special interests surrounding public employee pensions and ease financial demands on government coffers.

“People are waking up and realizing that someone is going to have to pony up the money and pay for these rich retirement plans,” said Bob Williamson, a longtime critic of the county’s pension costs who last year was appointed to the retirement board. “It’s certainly a big issue here, with these horrendous unfunded liabilities.”

The county’s current figure for unfunded pension liabilities - the cost of benefits for future retirees - is $449 million. The county also owes $459 million on a pair of pension obligation bonds.

County officials said the new citizens oversight committee will be tasked with coming up with future cost-reduction recommendations for the Board of Supervisors, which could include negotiating a lower benefit formula for new employees, requiring so-called legacy plan holders to increase the amount they contribute toward their retirement, and asking all employees to help pay down the county’s unfunded liabilities by contributing more out of their paychecks.

Supervisors backed the new citizens oversight committee, saying the panel’s recommendations would help the county meet its lofty pension savings goals.

By 2024, Sonoma County wants to have cut its pension-related costs in half, to 10 percent of its total payroll for salaries and benefits, now at $550 million. County officials said they plan to lower those costs through concessions and changes secured in labor negotiations. Citizen recommendations could factor in those efforts, officials said.

While citizens advisory groups are common in government, they are rarely formed to provide robust input on public pension systems, according to state pension critics and organizations overseeing policy issues in the state. Pro-labor groups and others concerned with rising taxpayer costs are paying attention to Sonoma County’s proposal. The outcome could directly affect the livelihood of thousands of county residents, observers said.

“This could have consequences for future generations if we don’t get this right,” said Rich Harkness, a pension critic and Santa Rosa resident who argued for young people to be included in future decisions.

County staff identified four other citizens oversight groups that review pension-related matters in California, including in Santa Rosa, San Jose and Oakland. Still, the county’s approach differs significantly from pension oversight groups in those cities because of the broad scope of work proposed. The group will be tasked with reviewing the county’s pension spending practices to date and coming up with ideas for lowering its total costs.

Advocacy groups who have sharply criticized Sonoma County’s pension spending said the effort is overdue.

“In terms of politics, public employee pensions are a huge issue, and it’s about time government gets some objective participation from people who don’t have a personal stake in keeping their fat pensions,” said Ed Ring, executive director of the California Policy Center, a conservative think tank that has been sharply critical of public pension spending in the state. “The only way we’re going to be able to have public services and reasonable taxes and a good business climate is if we get more input from ordinary people.”

Julie Wyne, the county’s pension system administrator who previously ran Orange County’s much larger - and more politically embattled - retirement fund, said the county already has instituted some far-reaching reforms.

“Employees here get the short end of the stick, but they’re paying a lot into their retirement system,” Wyne said, referring to people who started working for the county after 2011 and pay more into their retirement than legacy plan holders.

Since 2013, the county has cut costs in three areas, resulting in more than $180 million in savings over the next 10 years, according to Chris Thomas, assistant county administrator. The changes include:

- Eliminating the pension spiking opportunities for employees - refraining them from cashing out sick days, for example - resulting in $41.3 million in savings by 2024.

- Negotiating a lower benefit formula for new employees, and by eliminating any employer payments in lieu of employee contributions to the retirement system, resulting in a combined savings of $136.7 million.

- A first-time-ever $3.5 million payment in January toward the county’s unfunded liabilities also helped, county officials said.

Supervisors debated the structure of the new oversight committee last Tuesday. They agreed the committee, with five to seven members, should be composed of people who don’t currently benefit from the county’s retirement system. The board was split, however, on finer details about prospective candidates’ backgrounds.

Rabbitt went against a staff recommendation to select a former retirement system administrator in Orange County and Mendocino County to lead the new group. Zane and Chairwoman Susan Gorin said if the board wants recommendations that aren’t skewed by special interests such as labor or taxpayer advocates, it needs to select people who reflect Sonoma County’s diverse population.

“It’s naive of us to think our politics aren’t shaped by our gender, or our race, or our socioeconomic status,” Zane said, advocating that seats be set aside on the committee for specific groups to ensure diversity. “If it’s made up of a bunch of rich white men with defined benefits … it’s not independent. If it’s truly independent, it has to be diverse.”

Rabbitt steered the board away from setting aside a specific number of seats for women, instead highlighting the importance of finding people with strong financial backgrounds, yet who are not involved with any public retirement system.

“There are some people who toss out all these numbers, who want to blow up the entire pension system,” Rabbitt said in an interview. “So choosing people who are completely out of the system would ensure we have totally unbiased opinions, and help dispel some of their ammunition.”

Supervisor James Gore said the panel should first focus on developing an independent financial analysis of the county’s accounting methods. Gorin agreed, but expressed concern that the committee’s role could require more time and money than currently envisioned.

“I’m concerned about mission creep and budget creep,” Gorin said.

She referenced a similar problem with the citizens task force charged with drafting recommendations about policing methods in response to the shooting of Andy Lopez.?Supervisor Efren Carrillo attended Tuesday’s meeting, but he stepped out of the hearing room during the pension discussion. He did not vote or comment on the item, saying he had to attend to a family matter.

Tuesday’s hearing drew little attention for the hot-button topic that has become a major political issue for voters and candidates seeking public office. Three people spoke on the matter, advocating that supervisors select people familiar with pension issues.

“This could have an impact on not only compensation packages, but the county as a whole - things like parks and roads,” said Williamson, speaking as a resident and not as a member of the retirement board. “We need to balance out the special interests that are always going to be there; they are not temporary, so I don’t think this group should be.”

The county is accepting applications for the oversight committee on pensions for the next month or so. Then, county officials said, Gorin and Rabbitt will evaluate applicants and their backgrounds, with the full board expected to appoint the group by the end of July.

The nine-month effort is expected to cost $150,000. The money will be used to pay people a stipend of $100 per meeting and for outside financial analysis, if necessary.

You can reach Staff Writer Angela Hart at 526-8503 or angela.hart@pressdemocrat.com. On Twitter @ahartreports.

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Editor’s Note: The original version of this story inaccurately summarized the $136.7 million in savings to Sonoma County’s pension system over the next decade. It has been corrected in the story above.