Stanislaus County officials said a big increase in its retirement contribution would force the county to lay off more employees and cut services in the next financial year.
So, the county is again asking the Stanislaus County Employees' Retirement System to use supplemental benefit reserves to soften the impact on the county budget. The county is facing an increase in its annual pension fund payment, now estimated at $23 million, because of Stan-CERA's investment losses in the past two years.
The increase would worsen a county budget deficit projected at more than $30 million for the fiscal year that starts July 1.
County Chief Executive Officer Rick Robinson said in a letter to StanCERA that "the impact of these rate increases will be the loss of many jobs, affecting some employees who have worked for the county for considerable years, as well as the elimination and reduction of services."
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Robinson didn't specify how many jobs would be cut.
The county is asking the Stanislaus County Employees' Retirement Association to:
Allocate $12 million in each of the next four fiscal years to offset its retirement contribution. The $48 million would come out of supplemental benefit reserves.
Transfer the remaining $9 million in supplemental benefit reserves to the main pension fund.
Spread the county's unfunded liabilities over a 30-year payment schedule.
Require Ceres and the five special districts in StanCERA to pay their share to make up for investment losses. Since the mid-1990s, contributions from those agencies have not been affected by investment losses or gains.
At its meeting Wednesday, the StanCERA board took no action on the county proposal. Ceres City Manager Brad Kilger asked for four more weeks to study alternatives for spreading a $1.2 million payment increase over time.
StanCERA could take action at its March 10 meeting or at a special meeting next month.
EFI Actuaries, the firm that advises StanCERA, recommended the employers boost their contributions from $32.1 million to about $48 million next fiscal year to make up for investment losses from early 2008 to June 2009.
StanCERA's portfolio dropped more than $400 million in value before rebounding in the second half of 2009. As of December, it was worth $200 million less than in 2007, when the fund was at $1.46 billion.
Retirees were upset last year when StanCERA agreed to shift $60 million from the supplemental benefit fund to help offset a county contribution increase of $22.7 million. The reserves paid for a medical stipend of as much as $370 a month and an extra cost-of- living increase for older retirees. StanCERA has suspended those benefits.
County officials say the supplemental benefits never were granted in labor contracts and the reserves were improperly bloated with earnings before the recession.
The request to take the $12 million per year would allow the county to retire a $108 million pension obligation bond issued in 1995. The county then could reallocate the debt payments to address its unfunded liabilities.
Retirement board member Clarence Willmon said the reserves could be used to assist other employers, such as Ceres. "It would not be fair to all employers if we did not help them equally," he said.
Ceres, which is facing a brutal budget in 2010-11, can't afford a big jump in its pension obligation, Kilger said. EFI has given the city the option of smoothing its unfunded liabilities over 30 years instead of 20 years.
"We would like to do some form of smoothing strategy," Kilger said, adding that it will cost the city more in the long run.
Members of the Retired Employees of Stanislaus County, a group of StanCERA pensioners, said nothing about the county proposal to use the supplemental benefit reserves. The group filed a lawsuit to challenge Stan-CERA's decision last year to transfer the reserves and, citing the litigation, declined to comment after Wednesday's meeting.
Retired county employee Lyn Bettencourt said the county no longer will have a cushion to soften the impact of a cost increase next year. Not all of the investment losses were recognized in the actuarial report released last month and the employers could have more unfunded liabilities when actuaries complete an analysis of pension spiking, Bettencourt said.
It's common for employees to boost their retirement pay by claiming unused vacation and extra compensation in their final year of employment. Bettencourt and other retirees contend that monthly employee contributions to StanCERA do not cover the spiking costs.
"The county is going to have a bigger problem next year," Bettencourt predicted.
Bee staff writer Ken Carlson can be reached at firstname.lastname@example.org or 578-2321.