Around California, counties slashing payrolls, services to benefit retirees

SACRAMENTO -- This year, the city of Roseville will spend about as much to fund its pension plan as it does on parks and recreation.

San Luis Obispo County will spend five times as much on pensions as it does prosecuting criminals.

And Stanislaus County's pension costs will be nearly double its $23.5 million general fund budget deficit.

The initial logic of increasing retirement benefits to retain quality employees has been turned on its head: Paying for those benefits is forcing local governments to lay off employees -- and cut programs.

"The old joke is that General Motors is just a health insurance company that makes cars on the side," San Luis Obispo County Supervisor Adam Hill said during a pension presentation at a recent board meeting. "My concern is that the county government is becoming a pension provider that provides government services on the side."

Yet today's escalating annual pension payments barely touch the looming shortfall: $28 billion in unfunded liabilities -- the difference

between what pension systems have and the pension benefits their employees have earned -- at the 80 largest city and county governments in California, according to an extensive review by McClatchy Newspapers of pension plan valuation reports.

On top of that, those cities and counties owe about $8 billion in pension-related bond debt -- all in a time of shrinking budgets. In many areas, the total pension shortfall is more than the annual payroll; in some it is more than the general fund budget.

Spread that debt evenly, and it comes out to about $4,000 per household in those cities and counties.

Already, Californians feel the impact of the rising costs. Local governments are cutting unrelated programs -- everything from parks to public safety -- to help pay for pension plans. Downsizing likely will continue both because pension contributions often are legal mandates, and, even with a recovering economy, because much damage already has been done.

A very few places are whispering about the nuclear option: bankruptcy. The Bay Area port city of Vallejo already went this route, largely to break its agreements with its employees.

It wasn't supposed to turn out this way.

When local governments passed enhanced retirement benefits at the turn of the millennium, the stock market was humming. Government leaders could just sit back, watch their employees smile and let the market do the heavy lifting.

"We're not creating an unfunded liability," then-Fresno County administrative officer Linzie L. Daniel vowed in 2000, when the county approved better retirement benefits to be offset by expected investment returns.

Since then, unfunded liabilities have increased from less than $100 million to $800 million in Fresno County.

'Five-year pain plan'

San Luis Obispo County's chief number cruncher, Assistant County Administrator Dan Buckshi, fiddled with his PowerPoint presentation a few months ago and warned his listeners that what he was about to show them was only the third year in the county's "five-year pain plan." The county supervisors in front of him chuckled feebly. They were well aware of the pain the county had endured.

They had watched their work force dwindle by nearly 13 percent, from 2,700 in 2002-03 to an expected 2,350 later this year. They'd instituted a hiring freeze, consolidated jobs, encouraged early retirement, scaled back capital projects and amortized losses over 10 years instead of five.

They also limited health care access for the poor by cutting community health clinic funding.