County hurt by rising pension

If left unchecked, the exorbitant cost of Ventura County's pension fund could threaten the county's ability to pay for basic programs and services, a grand jury report said.

"What I see in our current pensions, there's no question that we've seen a tremendous increase in cost and it's going to be very devastating to our county," Supervisor Peter Foy said. "Without increased revenue, the only way to pay for those costs is through increased cuts."

The current recession and collapse of the global investment market prompted the grand jury to investigate the fiscal health of the county's retirement plan. The results of the examination were released June 10.

According to the report, county pension contributions to the Ventura County Employee Retirement Association have increased more than 327 percent in the past decade.

Total county payments to the pension fund have increased from $32.7 million in fiscal year 199899 to a budgeted amount of $139.7 million in fiscal year 2008-09.

In addition, the pension contributions are projected to increase about 20 to 25 percent each year over the next several years.

"We are in a scenario where we really have to take a hard look at this or we will spend 75 percent of our revenues on salaries and pensions and there won't be any money to pay for the things government is supposed to do," Foy said.

Annual pension costs are affected by a several factors, including the number of active and retired employees in the plan, the compensation of active employees and retiree life expectancy.

The pension fund's assets are also susceptible to large swings in value based on investment performance and the granting of retirement benefits. The fund experienced substantial losses through the first nine months of fiscal year 2008-09, which contributed to an investment loss of about $1 billion in fund assets in calendar year 2008.

Foy said the county will be paying for those losses in the years to come.

If investment performance is again poor in 2009, the county would be forced to divert money from the general fund to the plan to pay pensions, reducing the money available for basic county expenditures.

VCERA manages the pension plan for more than 13,000 current active and retired employees. Benefits are determined by negotiations between the county and employee unions.

Foy said county pensions are "very generous" and that if costs are not controlled, there will be a backlash from taxpayers, many of whom have lost their own 401(k)s but are continuing to pay for county employees' pensions.

"That's very difficult for the average citizen to stomach," he said.

The grand jury made several recommendations to the county Board of Supervisors on how to tackle the pension problem.

First, the grand jury recommended that the board continue the moratorium on increases in pension benefits to county employees, something Foy said all five supervisors support.

Second, the grand jury suggested placing a proposition on the next countywide election ballot to require voter approval for increases in retirement benefits. The measure would be similar to Orange County's Prop J in the 2008 election and would serve as a long-term control of pension costs.

Foy said he's in favor of putting pension increases in the hands of voters.

"They are the ones paying that bill," he said. "They are the ones that should have that right."

Third, the grand jury recommended that, for new hires, the board look into replacing the current defined benefit pension plan, with a combination of reduced defined benefits and adjusted defined contributions similar to the private industry.

"I think we have a moral obligation to try to fulfill our promises (to current employees), but we know these pension plans are unsustainable, so we need to change them for the next group," Foy said. "By doing that we can hopefully try to make sure we don't go broke and we can still pay those pensions."

Finally, the grand jury would like to see surplus returns used to offset investment returns from belowtarget performance years instead of allowing VCERA to use them to provide additional benefits or offset members' contributions.

Supervisor Linda Parks agreed.

"We need to look at the retirement board's actions and continue our push that they don't use excess earnings to increase benefits," she said. "And that we need to hold the line on salary and benefits and I think that will go a long way."

The board and VCERA are required to respond to the grand jury's report within 60 days from the release date, and a response is requested from the county executive officer.

To view the entire report, visit grandjury.countyofventura.org.