The stock market funk of the past year is causing a half-billion dollar migraine for the Stanislaus County Employees' Retirement Association, and the malady might prove contagious, affecting retirees, the pensions of future county workers and services provided for residents.
The StanCERA retirement portfolio has lost more than $500 million since the end of 2007, which is about a third of the total fund. The loss is spelled out in a year-end report discussed at a StanCERA meeting this week.
The fall is a shock for StanCERA, which was at almost 97 percent of full funding just over two years ago. A public pension fund at 80 percent to 90 percent is considered good, said Elizabeth Kellar, executive director of the Center for State and Local Government Excellence in Washington, D.C.
StanCERA's new funding level won't be known until an actuarial report is given April 8 at the Salida Library, but it is sure to trigger a higher contribution level from cash-strapped Stanislaus County and the other government agencies that participate in the retirement system.
The $500 million loss is compounded by changes in actuarial assumptions recommended by a new StanCERA actuarial firm. Those changes will have a bigger impact on employer contribution rates than the market losses, StanCERA administrator Tom Watson said.
That's a headache for the county Board of Supervisors, which will have to pony up more money for the pension fund while coping with declining property and sales tax revenue and state budget cuts.
County Chief Executive Officer Rick Robinson said Wednesday that county budget crunchers have penciled in a 6 percent increase in pension contributions, which will take a $6 million bite out of the county's $173 million general fund.
The number is a guess, however, Robinson said. "We are anxiously waiting to see the actuarial study," he said. "There are a whole lot of unanswered questions right now. The county is doing a lot of 'what if' analysis without a lot of substance until the actuarial report comes out."
The additional money from the general fund will be felt by county residents in the form of diminished services, Robinson said. The general fund pays for departments such as the sheriff, the district attorney, probation, parks and recreation, and planning and community development.
Current county employees could see their contributions to the pension fund increase based on actuarial demographic data, but their pension benefits shouldn't change. The county could reduce pension benefits for future county employees, however, Robinson said.
County retirees could be affected as supervisors question the supplementary benefits they receive in addition to the base pension.
The county pays retirees a stipend averaging $225 for health insurance and a death benefit for funeral costs. Some older retirees get a supplemental cost-of-living adjustment. The benefits -- worth about $6.6 million -- are permitted but not required by law and have been funded by surplus retirement portfolio earnings in past years.
The county believes that the money set aside for those benefits can be pulled back into the pension fund, Robinson said.
"I'm sure that's going to be a concern," said Wesley Hall, who represents retirees on the StanCERA board. He added that the retirement board also has used excess earnings to lower the county's contributions to the system.
"Every one of the retirement systems (that fall into the same category as StanCERA) has been paying the ad hoc benefits. The law provides for it," Hall said. "We've been able, because we've had some really good years, to help out the county and pay the ad hoc benefits."
Richard McElligott, 79, a retired risk manager for Stanislaus County, said the loss of the health insurance benefit will hurt. The stipend covers health costs that MediCare and his AARP insurance don't, he said.
Still, McElligott said, retirees are in better shape than the unemployed. "There isn't a retirement fund in the country right now that isn't in the same spot. We are just lucky ours is funded," he said.
"If it's necessary, I guess they will do it," he said of the ad hoc benefit cuts. McElligott said he would like to see an agreement that the extra benefits would be reinstated if the pension fund gets healthy again.
As for the loss of the health insurance stipend, "It will hurt me, but I'll get by," he said.
Bee staff writer Tim Moran can be reached at email@example.com or 578-2349.