Sonoma County employees have distinct interests in reforming the current pension plan. Those interests sometimes get overlooked in discussions about pension reform.
Virtually all workers, including county workers, have a desire to see their compensation keep up with inflation, and most seek to improve their standard of living through salary increases. County employees also find their take-home pay impacted by payroll deductions for retirement benefits, which run about 20 percent of gross pay. When combined with other deductions for health care benefits and income taxes, even employees with seemingly good salaries feel pressed to have enough spendable income for their current needs.
The recent Independent Citizens’ Advisory Committee on Pension Matters heard anecdotal reports about employees feeling the pinch in their take-home pay. One key finding of the committee was that the excess pension costs (costs that exceed the amount set by the county as sustainable pension costs) are currently running about $50 million a year.
This excess cost burden erodes the county’s ability to provide the basic services to the community such as park and road maintenance, the hiring of additional sheriff’s deputies and all the other services the county provides its citizens. What wasn’t mentioned in the committee’s report last year, but should be acknowledged, is that the burden of excess pension costs also reduces the county’s ability to afford salary increases for employees.
Unfortunately, legal and political obstacles stand in the way of reforms that would reduce pension costs and improve the financial condition for employees, the county and taxpayers. In the absence of any changes to these obstacles, the county has only one tool to reduce its burdensome pension costs: that is to increase the contribution that employees make to the pension plan.
This is not a very appealing course to take because in reducing the county’s cost it increases the burden on employees.
A better way forward would be to revise the pension plan in line with the recommendations of the committee, which would benefit both the county and its employees with reduced cost burdens. The committee recommended the creation of a hybrid plan that combines a defined contribution and a defined benefit plan, and that realigns retirement income targets with generally accepted norms. Such a hybrid plan would also achieve the shared-risk goal the county initially adopted in its pension reform goals.
With the current plan, the county bears virtually all the investment risk and provides career employees with income in retirement greater than their final earnings. This is simply too costly, no matter who pays for it.
With desires come responsibilities. Employees have a role to play in affecting reform. Simply put, the legitimate needs of the employees cannot be met without reducing the overall cost of the pension plan. To implement the type of reform recommended, enabling legislation is required by the state Legislature. Practically speaking, it’s hard to see that happening without political support from employees. Employees can help themselves by cooperating with the county and vigorously supporting the enabling legislation that is needed.
There is little evidence that employees yet see the benefit of their cooperation. It’s incumbent on the county to make the case to employees, and in future contract negotiations to insist on cooperation as a condition for salary increases and avoiding the need for ever-higher employee contributions to their pensions.