The past two weeks have been eventful on the pension front.
A report by Robert Fellner of Transparent California outlines the pension liabilities of Marin municipalities and the county governments. It indicates that the combined debt of these entities exceeds $1 billion.
Here are the findings, in order from highest to lowest per capita unfunded liability cost, or the theoretical cost per each household resident.
The first figure represents total liabilities — unfunded pension debt, unfunded retiree benefits, and any pension obligation bonds. The second figure is per-capita cost.
• Mill Valley — $49,182,483; $3,538.
• Sausalito — $21,255,391; $3,010.
• San Rafael — $166,334,000; $2,882.
• Marin County — $641,170,000; $2,540.
• Corte Madera — $22,352,198; $2,416.
• Larkspur — $21,266,837; $1,783.
• Novato and Novato Fire Protection District — $80,509,026; $1,551.
• Belvedere — $3,097,602; $1,498.
• Ross — $3,320,265; $1,375.
• San Anselmo — $13,617,305; $1,104.
• Fairfax — $7,058.579; $949.
• Tiburon — $8,055,023; $899.
Kudos to Sausalito and Corte Madera for taking action to reduce debt. The focus must remain on those city halls doing next to nothing.
The per capita costs of the pension liability for taxpayers do not include additional liabilities for special districts serving cities and the county.
Stanford professor Joe Nation warned that more reasonable investment assumptions indicate county liabilities were nearly triple the debt estimated by officials who count on a buoyant stock market.
Latest figures reflect a staggering shortfall in the pension fund earnings of Marin County Employees Retirement Association — the county pension board overseeing the county government, San Rafael and the Novato and Southern Marin fire districts
MCERA uses a 7.25 percent assumption rate on assets and earned only 1.68 percent. CalPERS, which oversees the cities, agencies and special districts, uses a 7.5 percent assumption rate but earned only 0.61 percent.
The situation remains dire.
Underfunded retirement plans will have to set aside more tax dollars to fill the shortfall.
On the brighter side for taxpayers, a unanimous appellate court decision found in favor of the MCERA in an action to curb pension spiking. The Marin Association of Public Employees, the largest employee union in the county, was plaintiff.
Pension spiking is the inflation of income in the calculation of pension amount, a practice prohibited by the Public Employee Pension Reform Act of 2012 (PEPRA).
Although the unions might appeal the decision to the state Supreme Court, it is unlikely to change due to this provision in PEPRA:
“Prohibit the following types of compensation from being used to calculate a retirement benefit on: compensation paid to enhance a retirement benefit; compensation previously provided ‘in-kind’ and converted to cash in the final comp period; one-time or ad hoc payments; terminal pay; pay for unused leave or time off; pay for work outside of normal hours; uniform, housing or vehicle allowances; pay for overtime, except planned overtime, extended duty workweek, or pay defined in the federal labor codes; employer contributions to DC plans; and, bonuses.”
In its decision, the court stated: “As will be shown, while a public employee does have a ‘vested right’ to a pension, that right is only to a ‘reasonable’ pension — not an immutable entitlement to the most optimal formula of calculating the pension.”
Further, “the Legislature may, prior to the employee’s retirement, alter the formula, thereby reducing the anticipated pension … so long as the … modifications do not deprive the employee of a reasonable pension.”
Sacramento Bee Columnist Dan Walters wrote: “It brings something new to the pension debate and gives new life, or at least new hope, to pension reformers who have repeatedly collided with the California rule.”
The California Rule is the mistaken notion that pension calculations could never be changed — period. However, the appellate court disagreed, stating, “Short of actual abolition, a radical reduction of benefits, or a fiscally unjustifiable increase in employee contributions, changes can be made up until the time the worker retires.”
Jody Morales of Lucas Valley is the founder of Citizens for Sustainable Pension Plans, a Marin-based public pension reform group.
