Wednesday, March 31, 2010

Fresno Co. gets one-two punch on budget crisis

Fresno County government got a double dose of bad news Tuesday -- the grand jury declared the county's pension plan unsustainable just as county supervisors learned they face deep cuts next year, driven in part by soaring pension costs.

The county's pension costs are expected to rise by tens of millions of dollars each year and deprive taxpayers of government services, the grand jury said in a report issued Tuesday.

The report offered little new information about the pension problem, which has been looming for years. But it offered a painful reminder as supervisors learned they face a $23 million shortfall next budget year.

The county will need to eliminate at least 330 out more than 7,000 jobs, County Administrative Officer John Navarrette told supervisors Tuesday.

That amounts to nearly 9% of the county's discretionary spending this budget year. Most of the cuts are expected to come through layoffs, and not elimination of unfilled positions.

The county has a budget gap in part because it has fallen behind in contributions to the employee retirement plan and now must catch up.

Supervisors on Tuesday approved, as expected, a 13% increase in the county's contribution next budget year, to $143 million.

That doesn't include an additional $34 million the county will pay next year on debt for bonds the county used to bail out the pension system eight years ago. The county's pension bond debt for the next 24 years: more than $1 billion.

The grand jury report outlines well-established reasons for the county's pension debt -- huge investment losses and big benefit increases -- and criticizes supervisors for not showing more leadership on the issue.

Supervisors still were reviewing the report Tuesday, but some of them agreed with the key conclusion.

"I'm really coming to the conclusion that we don't have a sustainable program," Supervisor Judy Case said.

But Supervisor Henry Perea said officials shouldn't worry too much, pointing to a turnaround in the economy.

After losing about $1 billion in the stock market in recent years, the county's pension plan has recovered about $600 million of those losses, retirement officials said.

The county's biggest employee group, Service Employees International Union Local 521, criticized the report.

"We're not saying the plan is in great shape," said union spokesman James Geluso. "We're saying it's not as bad as the grand jury makes it sound. Things will get better."

The county has created lower benefit packages in recent years, but as the grand jury noted, the lack of new hires has meant little cost savings.

The grand jury laid blame for the pension debt at the feet of supervisors. They failed to say no to union demands for higher benefits, the grand jury said.

About 10 years ago, the county settled a lawsuit brought by employee groups over the way benefits were calculated and the county's failure to make contributions to the plan some years.

Then-Gov. Gray Davis vetoed the settlement amount, but county officials got around that by setting up a supplemental benefit. The result: Fresno County has one of the most generous retirement plans in the state, officials say.

In 1998, a county employee could retire after 30 years of service at age 60 and receive 70% of his pay, according to the grand jury report. Ten years later, an employee in the same situation would receive 98% of his pay.

Echoing criticisms others have made, the grand jury noted that the employees negotiating the settlement for the county stood to benefit from the increased benefits. The grand jury recommended the county set up a commission with employee groups and outside experts to examine the pension crisis.

At the direction of the board, Navarrette recently agreed to create such a task force, but said he wouldn't include outside representation until he worked with union groups. He said he wanted to get concessions before adding citizens to the task force.

The grand jury criticized county officials for failing to come up with more decisive action for pension reform than the proposed reduction of county staff. To close the pension gap, the county would have to fire 1,000 employees, the report says.

At the same time, the grand jury acknowledged that key pension reforms -- such as modifying the county's defined-benefit plans -- would require state legislative approval. The report asks supervisors to lobby for such changes.

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