In the future, working for Stanislaus County government may not hold the promise of retiring with as lucrative a pension plan.
County leaders say it is time to restructure retirement benefits that many consider excessive and that strain the county budget. The action comes amid growing angst over generous pensions that contributed to the city of Vallejo's collapse and have stressed government agencies across California.
Government pension costs also are expected to explode as baby boomers start to retire in large numbers.
"There are a lot of concerns," county Supervisor Bill O'Brien said. "We have been talking about it for several months — to look at a new tier system for new hires. In the next couple of months, the entire system needs to be looked at."
Sign Up and Save
Get six months of free digital access to the Merced Sun-Star
Chief Executive Officer Rick Robinson said the examination of benefits will apply to union-covered employees as well as managers and department heads. The county could reverse a policy that has allowed managers to apply up to 85 hours of holiday cashouts to retirement, he said.
The county granted generous pension benefits during negotiations with unions over the past 10 years; changing the structure will require additional talks. Pensions will be on the table as bargaining groups come up for negotiations next year, supervisors said.
New hires may get new limits
The county is exploring separate tiers for new employees, with an aim to raise the retirement age, lower retirement payments and reduce the impact of pension spiking, which happens when employees apply unused vacation and other pay items to retirement.
Under the proposals, employee compensation that contributes to retirement would be averaged over three years.
"We want to make sure we treat all of our parties fairly and impartially," Robinson said.
Officials say they can't do much about the pensioners getting six- figure payments and don't intend to change benefits for existing employees.
In January, a county-hired actuarial firm is expected to study the costs of starting new benefit tiers and meeting the pension obligations for existing employees.
The county also could reconsider whether to continue paying the employee share of retirement contributions for certain groups. It has paid the contributions for sheriff's deputies, sheriff's supervisors, emergency dispatchers and district attorney investigators, and a small percentage of the cost for deputy probation officers, probation corrections officers and attorneys.
The benefits for county employees are administered by the Stanislaus County Employees' Retirement Association, which manages a $1 billion pension fund and pays benefits to retired employees of Ceres, the Superior Court and five special districts.
Statewide standards for some
O'Brien said no county will have an easy time changing the benefit structure for law enforcement personnel. They are able to retire at age 50 with upward of 90 percent of salary. Because it is a standard benefit in California, he said, it would require cooperation with law enforcement agencies statewide.
Supervisor Vito Chiesa is optimistic about getting cooperation from local labor groups.
"I have to believe everyone understands that pension costs are going to break all of the local governments in California down the road," Chiesa said. "I think everyone will see it is unsustainable."
An official with the Stanislaus Sworn Deputies Association said retirement benefits were not an issue in recently completed negotiations over an 18-month contract. Deputies agreed to no wage increase, but will start negotiating a new contract with the county in late 2010.
"If you get rid of that retirement benefit," said union President Vince Bizzini, "you will have a difficult time hiring police officers to work here. ... The retirement benefit is a huge hiring point."
Some think there should be a cap on pensions for administrators, rather than taking benefits from rank-and-file employees.
"I think the county has authority to say no one can earn a pension that is greater than their salary," said Michael O'Neal, president of Retired Employees of Stanislaus County.
Stanislaus County is expected to spend $36.36 million on retirement costs this fiscal year, up from $31 million in 2007-08, and could see those costs rise to more than $45 million in the budget year that starts July 1.
A report early next year will assess the damage from stock market losses to StanCERA's pension fund in 2008 and the first half of 2009, which could force public employers to pour more money into the system.
In April, the county faced a $22.7 million increase in its contribution to StanCERA because of faulty assumptions about retirement patterns made by previous actuaries.
Retirees were upset when Stan- CERA's board gave the county a break on its 2009-10 contribution by shifting $60 million in nonvested benefit reserves to shore up the fund. The board also suspended a supplemental cost-of-living increase and health care stipend for retirees.
Retired Employees of Stanislaus County says it's pursuing litigation over the April decision and will resist any county attempt to use more of the reserves.
Other agencies, such as Ceres, also are anxious about the health of StanCERA's pension fund.
"Ceres is currently facing a projected budget deficit of $1.7 million and that does not factor in any shortfall that StanCERA may ask us to correct," City Councilman Chris Vierra said. "If the state keeps taking our revenue and it's compounded with a StanCERA shortfall, we could be looking at some very troubling times."
Market losses add to problems
The recession has spelled trouble for other county pension plans in the state and major funds such as the California Public Employees Retirement System. According to watchdog groups, the market losses make it difficult for the funds to keep up with pension payments.
"With the baby boomers beginning to retire in droves, about 200 agencies' pension plans are now paying more out in benefits than they collect," said Marcia Fritz, vice president of the Coalition for Fiscal Responsibility in Sacramento. "This downward spiral could accelerate badly if we suffer more losses or unions continue to push for higher wages and benefits."
Bee staff writer Ken Carlson can be reached at firstname.lastname@example.org or 578-2321.