Pat Miller: Sutter County pension debt growing
The California Public Employees Retirement System (CalPERS) recently issued its annual actuarial retirement report which indicates Sutter County's pension debt grew another $7.2 million in one year, going from $44.8 million to $52 million as of June 30, 2008. The $52 million debt doesn't include the investment losses suffered by CalPERS in the market downturn in 2008/2009. Another year and nothing has been done by the Board of Supervisors to slow the financial bleed.
In just seven years Sutter County went from $28.8 million in the black to $52 million in the red — a minus $80.8 million. The increase in debt can be attributed to two factors:
1. Decreases in CalPERS investment returns and
2. The 2004 formula increase from 2 percent at 55 to 2.7 percent at 55 passed by the Sutter County Board of Supervisors without a financial analysis and without due discussion by the Board of Supervisors and the public.
The following is Sutter County's pension debt history:
• 2001: Sutter County had a surplus of $28.8 million in its CalPERS account and was considered a "Superfunded" agency
• 2002: Sutter County's surplus dropped to $6 million
• 2003: Sutter County owed $11 million to CalPERS
• 2004: Sutter County's debt increased to $31.4 million. Sutter County increased its CalPERS payment formula from 2 percent at 55 to 2.7 percent at 55 — a 35 percent retroactive increase (safety employees' retirement went to 3 percent at 50)
• 2005: the debt increased to $36.7 million
• 2006: the debt increased to $36.8 million
• 2007: the debt increased to $44.8 million
• 2008: the debt increased to $52 million
When the 2008/2009 CalPERS investment losses are factored into what the county will owe in future years, there is certain to be a major increase in what the county owes CalPERS. However, we won't see major payment increases until 2011-2012 because CalPERS calculates payments using 2-year-old information. CalPERS also recently increased the number of years — from 15 to 30 years — over which the contribution increases are "smoothed" or spread out in an effort to reduce the impact on cities and counties. But those stock market and real estate investment losses will undoubtedly increase the county's contribution rate substantially for many years to come.
Next year Sutter County will pay over $4 million in interest alone on the $52 million debt. That is money that cannot be spent on services to the residents of Sutter County.
Sutter County pensions are excessive — they are far higher than most state retirements — giving employees with 30 years' service 81 percent of their last year's salary. Safety employees can receive 90 percent of their salary after 30 years and retire as early as age 50. In addition, county employees will collect Social Security benefits giving many retirees more than when they were working. People are living longer, are healthier and many choose to work into their 70s. Action needs to be taken now to bring our pension costs under control. The Sutter County Taxpayers Association recommends:
1. Changing the formula for new non-safety employees to 2 percent at an age aligned with Social Security retirement and increasing safety employees retirement age to better reflect life expectancy.
2. Basing retirement pay on a three-year average instead of the current last year salary.
3. Having employees pay their 8 percent or 9 percent share now paid by the county (we taxpayers). State employees and private sector workers pay into their retirement accounts — county employees should too.
4. Requiring a vote of the people for any pension increases.
Making changes now will not affect current employees since, by law, the current pension formula cannot be changed for existing employees unless they agree to the change or the county undergoes reorganization under bankruptcy laws.
Year after year, SCTA has urged our Sutter County Supervisors to address this problem. There is no better time than now to lessen the burden on the taxpayers in future years and to preserve the county's dwindling financial reserves.
Pat Miller is president of the Sutter County Taxpayers Association.
