Merced County's coffers only hold 71 percent of the money needed to pay out future pension plans.
Despite the sobering statistic, many Merced County leaders said they aren't concerned about the $240 million shortfall in their eventual retirement liability.
The county's not going out of business anytime soon, so there's no need for 100 percent coverage, they argued. Instead local leaders said adjustments needed to be made to the way pension benefits are figured, a move that would ratchet down retirement benefits mailed to future county retirees and cut the pension fund's obligations.
Calculated out, the unfunded liability for Merced County's pension plan comes to roughly $1,700 per Merced County household.
The growing unfunded liability of eventual retirement payments is a problem that's been lingering for some time. At the turn of the century, the county's future pension funds were fully funded, although by a borrowing scheme. By 2004, the county's liabilities were already at $101 million. The pension trust is now 70.5 percent funded, a far cry from the 85 percent mark that most counties reach, and still significantly lower than the 80 percent that financial consultants consider "healthy."
A series of decisions -- at the county and state levels -- over the past 20 years, stunted the growth of the fund, local leaders said. Increased benefit packages for state workers passed by the Legislature in 1999 and 2001 led almost immediately to increased benefit packages in every other retirement system, officials said. "It had an effect overnight," said John Carlisle, president of the Retired Employees of Merced County Association.
It's been virtually impossible to go back to lower benefits since then, said Board of Supervisors Chairman Jerry O'Banion. "It's difficult because to recruit someone to work in Merced County over San Mateo or the Bay Area, you need to have those same benefits."
That statewide benefits increase, coupled with county-specific retirement perks and rapidly increasing salaries -- the average compensation for county employees went up 7.4 percent from 2007 to 2008 -- have made maintaining a high fund balance hard. Before 2005, the county retirement plan paid $100,000-plus annual pensions to just 14 former employees; 23 people since 2005 have cashed in $100,000-plus plans, according to the Merced County Employees Retirement Association.
Two years ago, the county retirement board went to court to let a judge decide whether the board had to calculate certain vacation sell-back programs into a retiree's pension payments. In the same time frame, former county CEO Dee Tatum saw his base salary leap from $145,900 when he was hired to the top spot in 2001 to a final figure of $261,000 when he retired last year.
The issue in the vacation sell-back court case was a semantic loophole that the retirement board felt unfairly allowed retiring employees to cash out vacation twice in one year, bumping up the final compensation number used to calculate their pension payments. The court decided the retirement board had to allow the double sale in their retirement benefit calculation.
To this day, all county employees can cash in 40 or 80 vacation hours for a lump sum each December, depending on their rank. Those employees can also cash in up to 180 unused vacation hours at retirement (the exception to this is the county CEO, who can cash in 360 hours at retirement).
Another perk for the county's 30-some top-level managers is called "management time off." Depending on an employee's hire date, he gets 96 hours or 12 workdays time off for "uncompensated time worked," each year. The hours can't be cashed in, but are used in lieu of vacation time.
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