By Anna Bitong
A report commissioned by a local taxpayers group says that its proposed pension reform measure for new Ventura County employees would save the county $460 million over 15 years.
The analysis was done by the Reason Foundation, a libertarian think tank that conducts public policy research.
Ventura County CEO Mike Powers said that a study from the actuary that works for the county retirement system, Segal Consulting, will be released in mid-May.
The Committee for Pension Fairness, formed by the Ventura County Taxpayers Association, has been collecting signatures since February to get its Sustainable Retirement System Initiative on the November ballot.
The proposed initiative aims to reduce the county retirement system’s estimated $1-billion debt by replacing the current pension system with a 401(k)- style plan for all new employees.
Under the proposed measure, newly elected county officials and county employees hired after June 30, 2015, would be enrolled in a 401(k)-style defined contribution plan to which the county would contribute no more than 4 percent of compensation for employees enrolled in Social Security.
The county would contribute up to 11 percent for police and fire personnel not enrolled in Social Security and 5 percent for those who do receive the benefit.
The plan also seeks to limit pension spiking by giving the county Board of Supervisors control over pay raises for five years.
The initiative, supported by Ventura County Supervisor Peter Foy, needs the signatures of more than 26,000 registered voters in Ventura County by May 16 to get on the ballot.
The measure recently received a $75,000 grant from the Action Now Initiative, a nonprofi t focused on pension reform.
“ We have seen an overwhelming response from people who want to put this on the ballot. They sense the need for reform,” said Jonathan Wilcox, a spokesperson for the pension reform committee. “We have been extremely confident that this is going to be on the November ballot.”
But Powers said that eliminating the pension system could hinder the county’s ability to recruit and retain qualified employees, a stance shared by Ventura County Sheriff Geoff Dean.
“Having a successful organization like we do at the county, it’s all about having high-caliber people,” Powers said.
Ventura County contributed $162 million to its pension fund in 2013, up from $45 million in 2004, as reported by the Committee for Pension Fairness. The 2013 figure accounts for 17 percent of the county’s budget.
As pension costs rise, how is the county handling the retirement system’s estimated $1-billion unfunded liability?
Powers said that the county, unlike other government entities, has a relatively short amortization period.
“Most pension systems have (unfunded liabilities); the question is, how are you dealing with them? Our county is dealing with them in a more direct and rapid way by having a shorter amortization period of 15 years, versus 30 years, which is more common,” he said.
The county recently received the highest long-term bond rating for the first time, he said.
“A long-term bond rating is a very positive reflection on the county’s finances and operations,” Powers said. “They look very closely at all of our financial liabilities and operations. We think that’s an important validation of our fiscal stability of our county.”
But advocates of pension reform believe the current retirement system isn’t sustainable.
They argue that the millions of dollars spent on pensions could instead be used for public services.
If approved, the pension reform measure would save the county $5.4 million in two years and nearly $52 million over five years, according to the Reason Foundation’s actuarial analysis, which adopted the assumptions used in the latest valuation for the Ventura County Employees’ Retirement Plan.
A report by Anthony Randazzo, director of economic research for the Reason Foundation, said that the county pension fund’s investments have not been able to reach its assumed rate of return.
In addition, the California Public Employees’ Pension Reform Act, which went into effect last year, doesn’t decrease the pension system’s debt or address shortfalls in investment returns, the report said. Among the act’s provisions: The state law caps the salary amount that can be used to calculate a retirement benefit.
“The combination of needing to both pay down the unfunded liability and adopt more realistic investment assumptions will require an increase in county taxpayer contributions into the system unless fundamental reforms beyond PEPRA are implemented,” the report said.
Powers said that PEPRA reform did have a big impact on the county by lowering pensioneligible pay.
“In the late ’90s, the Supreme Court ruled that many of the compensation benefits that had previously not been considered part of your final compensation were now added to your base pay for pension purposes. PEPRA returned it back to base pay only.”
Asked if the county is spending too much on its pension system, Powers said, “We’re trying to fund our pension system in a sustainable way.
“When actuaries tell us how much is required to pay in order to maintain our funded status, that’s exactly what we pay. I think that’s important. I think we’re being responsible in how we fund it.”