Sonoma County employees could take on more pension costs under policy backed by supervisors

Sonoma County government is poised to press its employees to agree to new set of cost-sharing measures for pensions, aiming to curb taxpayer expenses that have continued to rise even after a wave of state and local reforms set in motion six years ago.

The Board of Supervisors agreed this week to advance several new policies that could result in ongoing savings toward county pension costs, which skyrocketed over the past 15 years as a result of a controversial, statewide move to enrich retirement benefits for a generation of local and state government employees.

The higher-cost pensions proved too expensive in the wake of the recession for many California municipalities, forcing several into bankruptcy. Others, such as Sonoma County, chose to borrow hundreds of millions of dollars to fill gaping holes in their pension investment funds.

'We're still paying the price for that,' said Supervisor David Rabbitt, speaking Friday in an interview with The Press Democrat editorial board about the cost of the enhanced benefits after the stock market downturn a decade ago.

At that time, county pension costs had already doubled from the early 2000s when the new, more lucrative pension benefits were approved by the Board of Supervisors. Between 2008 and today, taxpayer costs for county employee pensions have more than doubled again, to an estimated $116.8 million this year.

State and local reforms enacted in 2012, including reduced pension benefits for new employees, have slowed the rise somewhat. Pension costs for the county are set to peak next year at more than $117 million.

To further reduce those costs going forward, the county wants workers to share more of the expenses tied to the pension system's unfunded liabilities. Labor groups representing the bulk of county employees would need to agree to such a change.

A crucial cost-sharing provision the county already has in place with employees could be a decisive factor in those conversations. As part of the enhanced pensions approved in the early 2000s, workers agreed to pay more toward pensions, but that arrangement expires in 2023 and county leaders may look to extend it.

At the same time, the county continues to back legal efforts that would give it more flexibility to change retirement benefits after workers are hired and devise a new system that would combine elements of defined pension- and 401(k)-style plans.

At the outset of its pension reform efforts seven years ago, the county sought to bring pension costs down to 10 percent of its total payroll expenses by 2021. It later pushed that date back to 2024, a goal it is not expected to meet. Currently, pension costs account for 18.7 percent of payroll expenses. They are not projected to drop below 10 percent until 2029.

'I wish we were at 10 percent,' Supervisor Shirlee Zane said Friday in the interview with The Press Democrat editorial board. Since 2011, she and Rabbitt have led the county's pension reform efforts. 'It's a little disappointing that we're not getting there faster.'

County officials note that state law limits their ability to make lasting cuts to pensions for current workers. That limited authority, a constitutional protection known as the California Rule, is being challenged in several pending lawsuits and may end up before the state Supreme Court.

'We don't have a lot of options right now in terms of paying down these pensions,' Zane said, noting the county is supporting legal efforts to expand public employers' power to enact pension reforms.

'If we could get a crack in that California Rule, it will give us more options in negotiating with our union employees,' she said.

Supervisors endorsed a new policy Tuesday to implement recurring accelerated payments toward the retirement system's unfunded liability. The unfunded obligations total nearly $708 million, including almost $380 million in outstanding pension obligation bonds.

SEIU Local 1021, the county's largest union, is 'perfectly willing to sit down and talk about options,' said Joel Evans-Fudem, president of the Sonoma County chapter. But Evans-Fudem doesn't think any major pension changes should be part of the union's next contract. Negotiations are scheduled to start next month.

Already, the county and labor groups are eyeing the 2023 expiration of extra payments employees agreed to in order to help fund the enhanced benefits from the early 2000s. Those increased payments — about 3 percent of employees' pay — are being made even by staff members hired beginning in 2013, when a lower retirement benefit tier took effect.

Evans-Fudem said he's willing to look at extending the 3 percent payments and 'what to do with that money.'

'I'm already used to paying it,' he said. 'It would not be a new hit to my take home if I continued to pay it and somehow it made my pension benefit better.'

Jack Atkin, a member of the pension reform advisory panel the county created last year, said the county's ultimate goal should be creating a hybrid retirement plan that mixes pension-style defined benefits with 401(k)-style defined contributions. State law prevents the county from creating such a plan, so supervisors agreed to support legislative changes that would allow them to create one.

'Under the current law, the only tool in the county toolbox is to bargain for higher contributions,' said Atkin, a former leader of the Sonoma County Taxpayers' Association. 'But it would be better if employees were to cooperate with the county and help support legislation to support a hybrid plan.'

Evans-Fudem does not support a hybrid plan, which he thinks would shift too much risk onto employees.

Meanwhile, a lawsuit filed against the county by retired Santa Rosa attorney George Luke seeking to roll back the enhanced pension benefits granted in the early 2000s continues to make its way through the legal system. A Sonoma County Superior Court judge rejected the suit, but Luke is advancing his fight at the appellate court level.

A previous version of this article incorrectly said a Sonoma County Superior Court judge rejected the claims raised by a lawsuit filed against the county by retired Santa Rosa attorney George Luke. The judge rejected the suit but did not rule on the claims it raised.

You can reach Staff Writer J.D. Morris at 707-521-5337 or jd.morris@pressdemocrat.com. On Twitter @thejdmorris.