RIVERSIDE (CNS) – The Board of Supervisors on Tuesday directed the Executive Office to develop potential strategies for reducing Riverside County’s pension debt, including possibly moving some employees of loosely affiliated county agencies onto other retirement plans.
Supervisors Kevin Jeffries and Chuck Washington brought forward the proposal for a formal plan to which the Board of Supervisors can look for answers to swelling pension liabilities — and their drain on the general fund.
“There may be short-term solutions to reduce direct costs to the county,” they wrote in a statement posted to the board’s policy agenda.
The board’s 5-0 vote favored a detailed set of options presented by the Executive Office.
“During the (2020-21) budget cycle, we need to have in-depth discussions about projections and a time frame for getting us to (a sustainable) pension,” Washington told Chief Financial Officer Don Kent, who replied that work was already underway.
“This is going to require two things — time and money,” Kent said.
The county Pension Advisory Review Committee’s annual report, issued last month, found that, as of the most recent fiscal year, the county’s unfunded pension gap had widened from roughly $3 billion to $3.505 billion, and the county will have to increase appropriations over the next fiscal year and beyond to sustain the retirement system.
With $8.1 billion in assets, the county’s retirement apparatus is about 70% funded in both the miscellaneous and safety categories. The safety category covers sheriff’s deputies, District Attorney’s Office investigators, probation agents and others, while the miscellaneous rolls cover clerks, custodians, nurses, social workers, technicians and other employees not involved in any law enforcement function.
Jeffries and Washington expressed the need to move the funded status to 80% — a policy requirement.
“Eighty percent is where we’re supposed to be,” Jeffries said.
The supervisors pointed out that the county is carrying “several semi-independent commissions and joint powers authorities,” which are not under county control but “whose employees are considered Riverside County employees” and whose pensions are attached to the county.
They listed the Local Agency Formation Commission, the Riverside County Children & Families Commission and the Riverside Conservation Agency as examples.
Jeffries and Washington asked specifically for an analysis of “any burden that might exist of these outside agencies’ employees on the county and any strategies that might be employed to transfer their obligations elsewhere.”
“We need to get back on a pathway approaching 80% funding status,” Washington said.
The first tentative budget hearings will not be held until May, and that’s when the Executive Office may return with a report, or more likely in mid-June, when formal hearings will be convened over two days.
According to the PARC report, the amounts required to fund workers’ nest eggs in the California Public Employees’ Retirement System will escalate over the next decade.
A major influence on pension costs is CalPERS’ investment performance, which county officials have long complained has lagged the markets as a whole due to a state preference for narrow investment focuses — what Jeffries referred to as “politically correct” choices — over broader money-making opportunities.
According to the report, the mammoth public pension fund’s assumed rate of return on investments — also known as the discount rate — in the most recent fiscal year was 6.55% — nearly half a percentage point below the anticipated rate of return of 7%.
In order to make up for losses, the county will have to push its contribution rates up in the current fiscal year — to the equivalent of 24.5% percent of payroll for the safety category, compared to 21.6% currently, and the equivalent of 43% of payroll for the miscellaneous category, compared to 37.3% now, according to the report.
Employees across the spectrum in county government generally contribute less than 10% of gross earnings toward their defined-benefit plans with CalPERS.
General fund allocations to support the retirement system will steadily rise over the next decade, approaching $1 billion in general fund support by the early 2030s, according to the report.