Close to Home: Still seeking answers on pension costs

In 2002, the Sonoma County Employee Retirement Association settled a lawsuit with the employee unions that illegally granted retroactive pension formula increases. That process is now the subject of a lawsuit filed by retired attorney George Luke.

There are two reasons the increase was illegal. First, SCERA doesn't have the power to increase pension formulas, and second, an actuarial study by the Board of Supervisors required by law was never performed.

How do we know the employees aren't paying for the increase as was agreed? Basically because the county admitted it in 2011 when the supervisors released the report of their ad hoc pension committee co-chaired by Supervisors Shirlee Zane and David Rabbitt. Page 18 of the report includes the following text:

“In 2002, Sonoma County agreed to retroactive increases which became effective in 2004 for general members and 2006 for safety members. This decision was made with the understanding that employees would bear the full cost of the enhanced retroactive benefit. However, those initial estimates and stock market volatility caused an increased cost to the County to cover pension costs.

“The Ad Hoc Committee recommends staff commission a new calculation to identify the shortfall, if any, and to work with the labor organizations through negotiations to meet the intent of the prior agreements regarding the enhanced benefit formulas costs.”

To address the supervisor's request, the county administrator's office hired Bartel Associates, an actuarial firm, to perform a study in 2012. This is what the scope of work included:

“An analysis of what changes might need to be made to ensure total retroactive cost for enhanced benefits granted in 2002-2004 is paid by employees.” And to provide: “An analysis of the unfunded actuarial liability accumulated over the last decade to determine how much can be attributed to the granting of those enhanced benefit formulas.”

So where is the actuarial report, and why weren't employee contributions increased six years ago? The answer is found in the pension reform update report released in December of 2015 by the county administrator's office. This text was found on page 7 of the report:

“In 2012 and 2013, the County did engage an actuary, Bartel Associates. The actuary found that the assumptions necessary to make at this point, only one half of the way through the intended 20 years of increased employee contributions toward this cost, rendered the projections of any future shortfalls highly likely to be inaccurate and recommended that we conduct this review at a later time, closer to FY 23-24.”

So, basically, the county administrator's office told our supervisors that we should wait until 20 years after the increase, when almost all the employees who received the increase have retired, to find out how much additional money should have had taken out of their checks while they were working. Keep in mind that once employees retire additional contributions are impossible to collect.

Will the supervisors sell us out again and keep requiring taxpayers to pay about $70 million per year for the increase employees are required to pay for, or will our supervisors finally represent the interests of taxpayers and increase employee contributions to “meet the intent of the prior agreement?”

Ken Churchill is the director of New Sonoma, an organization of financial experts and citizens concerned with the finances and governance of our county. Information regarding the county's pension system and lawsuit are found on its website at www.newsonoma.org