Taxpayer costs for Sonoma County employee pensions are set to continue climbing for at least the next seven years, stripping away funds for public services and limiting the county’s ability to fund new initiatives, according to a citizen-led review of the county’s retirement spending.
By 2023, pension costs are projected to hit $146 million per year, a 700 percent increase since 2000, three years before the county — like most others in the state — first boosted retirement benefits for workers.
State-mandated reforms and other county moves implemented over the past four years could result in retirement costs dipping by 2024, according to county projections, and falling dramatically by 2031, when the county expects to pay off the remainder of its now-$425 million in pension bond debt.
But members of the independent pension review panel appointed by the Board of Supervisors cast doubt on the county’s projections, saying they feared the sharp rise in taxpayer costs to support the $2.3 billion retirement system could continue beyond 2030 if no additional steps are taken to rein in pension costs.
“If nothing more is done, it’s likely that costs are going to keep going up,” said Bob Likins, a retired actuary and chairman of a seven-member panel formed last year to review the county’s progress on its pension reform efforts. “Our message is urgent because we don’t want what happened (with bankruptcies) in Vallejo and Stockton and San Bernardino to happen in Sonoma County.”
The panel’s report, which went to the Board of Supervisors on Tuesday, concluded that the county’s bid to curb costs — up more than 500 percent since 2000 — has fallen short and appears unlikely to hit savings targets established by supervisors five years ago when the county sketched out its first moves to overhaul the system.
Already, the county has extended its time frame to reduce taxpayer pension costs to 10 percent of total spending on employee salaries and benefits. Currently, annual costs for taxpayers total $113 million, or 19 percent of total payroll.
Based on its own projections, the county is highly unlikely to meet its newest so-called sustainability target in 2024, a point that Supervisor David Rabbitt, who has helped lead the reform efforts, acknowledged.
Report calls for action
While reforms to date are expected to save the county $178 million, according to the review panel, chronic underfunding extending back to 2006 — before recession-era investment losses hit pension funds across the nation — will result in losses for public services totaling more than $1 billion dollars by 2030, the review found.
“Without change, the ability to provide for the health, safety and welfare of county citizens will be severely compromised,” the panel said. Its 95-page report called for additional, “aggressive” actions to halt escalating costs, including higher employee contributions to the pension system and lower benefits for future employees.
In their meeting Tuesday, supervisors received the report and listened to a presentation from three members of the panel, the first independent, county-formed entity to study pension costs, which have been a high-profile political issue since the recession.
The general feedback from the board recognized the continued rise in pension costs, which supervisors have acknowledged as unsustainable. Board members also praised county efforts to date to seek savings for taxpayers.
Sonoma County government pension system
Total current value of pension fund: $2.3 billion
Unfunded obligations to retirees: $406 million
Pension bond debt: $425 million
Taxpayer pension costs in year 2000: $18 million
Current annual taxpayer pension costs: $113 million
County’s projected peak in taxpayer costs, year 2024: $146 million
Projected savings from pension reforms to date: $178 million