Video: Why Did Pension Reform Fail in Ventura County?

Above is a video recapping the state of pension reform in Ventura County, California — and why County voters won’t find a pension reform measure on their ballot today.

Disclosure: the Reason Foundation is a libertarian research organization. Referenced in the video is a report produced by Reason that claims Ventura County could have saved $460 million over the next 15 years if the reform measure was enacted. The report was commissioned by the Committee for Pension Fairness, the group that sponsored the pension reform initiative.

From the video description:

On Tuesday, voters across the county will venture to polling stations for the midterm elections. In Ventura County, California, residents will be able to have their say on a variety of local issues, but there is one initiative they won’t be able to cast their ballot for—that measure is pension reform.

Like so many retirement systems across the country, Ventura has seen it’s pension fund go from having a healthy surplus to being over a billion dollars in debt. To avoid having their county become the next Stockton or Detroit, the Ventura County Taxpayers Association crafted a reform measure that would move the county from a defined benefit to a defined contribution system.

But shortly after it was approved to appear on the ballot, a local judge preemptively ruled the measure illegal and ordered it stricken from the 2014 election—thus ending Ventura’s hopes to change their costly pension system.

According to the judge’s ruling, even though voters elected to create a pension fund decades ago, the law provides them no way to exit the system through a vote. Reformers would have to either repeal or amend the law through state legislation to change their costly pension programs.

The decision was a setback for the VCTA, who had hoped a midterm victory could expedite change to VCERA’s growing mountain of debt. Taxpayers pay $153 million per year to the pension system—that’s triple the number they paid out over a decade ago. In the next five years, that number is expected to climb to $226 million.

“When you look at compensation and pensions…we’re right up there if not higher than anybody else,” states Bill Wilson, a member of the VCTA who has also served on the county retirement board for over 16 years.

The reform would have enacted a defined contribution plan whereby the county would contribute four percent for general county employees and 11 percent for public safety workers. The measure would have only applied to new employees hired after July 2015.

CalPERS May Have Approved Special Pay Items Without Doing The Math On Cost

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CalPERS recently approved a list of 99 “special pay items”, or bonuses given to workers whose jobs meet certain requirements.

But a report from the Los Angeles Times suggests that CalPERS approved the items without knowing how much they would cost.

From the LA Times:

CalPERS repeatedly told The Times it didn’t know how much the bonuses were adding to the cost of worker pensions even though cities submit detailed pay and bonus information that is used to calculate retirement pay.

Even a small bump in salary can cause a public agency’s pension costs to soar. An increase of $7,850 to a $100,000 salary can amount to an additional $118,000 in retirement if the employee lived to 80, according to an analysis by the San Diego Taxpayers Assn., a watchdog group that scrutinizes city finances.

Fitch, a Wall Street rating firm that weighs in on the financial health of governments, warned that the pension fund’s vote would burden cash-strapped cities.

“Cities and taxpayers will undeniably face higher costs,” said Fitch analyst Stephen Walsh. “Pensions are taking a bigger share of the pie, leaving less money for core services.”

[…]

At The Times’ request, CalPERS analyzed salary and bonus costs for Fountain Valley — one of hundreds of cities and public agencies that award pension-boosting bonuses to workers.

CalPERS found the Fountain Valley perks could hike a worker’s gross pay as much as 17%. About half the city’s workforce received the extra pay that will also increase their pensions, most of them police and fire employees.

CalPERS’ response to the report:

CalPERS executives said they don’t understand the anger caused by the board’s vote. The action simply clarifies the 2012 reform law, which was designed to stem rising pension costs, said Brad Pacheco, a spokesman for the agency.

CalPERS always assumed that new employees would continue to benefit from bonuses just as those hired earlier did, Pacheco said. The reform law is still estimated to save taxpayers $42 billion to $55 billion over the next 30 years, he said.

“It’s far-stretched to say this is a rollback of reform,” Pacheco said. “We implement the law as it was written, not how others wish it were written.”

The special pay items passed a vote from the CalPERS board, but some board members have voiced their displeasure for the rules, according to the LA Times:

State Treasurer Bill Lockyer and state Controller John Chiang both complained about the pension boosters but said they had little choice but to approve them.

“Many of the items on this premium pay list are absolutely objectionable,” said Tom Dresslar, a spokesman for Lockyer. But frustration, he said, “needs to be directed to the proper place, which is the public agencies that negotiated the perks through collective bargaining agreements.”

All of Pension360’s coverage of CalPERS’ special pay items can be read here.