By Bonnie Eslinger - Palo Alto Daily News Staff Writer
San Mateo County's rising employee pension costs should be controlled by cutting jobs and making workers pay more toward their retirement, a grand jury concluded in a report released Monday.
"There should be the political will to address the issue, otherwise we're not going to get anywhere with this thing," San Mateo Civil Grand Jury Foreman Bruce MacMillan told The Daily News.
In the 2005-2006 fiscal year, the county paid $78 million in pension costs for current and former employees. Its contribution almost doubled to $146 million by 2011-2012.
The "explosive growth" is largely due to a market downturn in 2008 and 2009 that lowered the value of the county's retirement assets and, subsequently, investment returns. As a result, the county has made up the difference to ensure employee retirement benefits continue as before, according to the report.
The county's pension contribution likely will increase by an additional $13 million in 2013-2014, according to the grand jury, because the assumed rate of return on its investments was lowered by the San Mateo County Employees' Retirement Association in May from 7.75 percent to 7.5 percent.
The county's generosity with taxpayer funds also has driven up retirement costs, according to the report. For example, while workers are supposed to pay part of their retirement costs, the county picks up a higher than required share of some employee groups such as management, attorneys and employees with more than 10 years of service. As a result, the county picked up 78 percent of some employees' pension costs in 2010-11 instead of 75 percent.
Some of those perks were offered up when the county was flusher with cash, MacMillan said, and county officials often argue that such deals are needed to attract the best workers.
"You could argue that maybe we need to get into the middle of the pack instead of being in the lead with the benefits," MacMillan said.
Although county officials also told the grand jury that employees have not received base salary increases in the last three years, the grand jury notes that "step increases" continue to be given for years served, changes in job classifications or other considerations, and pensions are based on salaries.
In 2007, the average annual salary for a county employee -- excluding public safety and probation workers -- was $72,648; in 2011, that had increased to $79,188.
The county also contributes to Social Security for all employees except public safety workers, which some other counties don't do, the report notes.
The grand jury concludes by recommending that the county "significantly" decrease the number of employees through outsourcing, reducing services and attrition; eliminating the higher employer percentage contribution toward pensions; negotiating reduced pension entitlements for future employees; and studying the possibility of withdrawing from Social Security.
"I think the reason fundamentally why there hasn't been hard decisions made is they are hard decisions," MacMillan said. "What we recommend is not any sterling insight into this, but something that's straightforward and obvious."
MacMillan said the grand jury does not suggest trying to solve the problem by looking for new revenues, such as the half-cent sales tax increase that the board of supervisors today will consider putting on the November ballot.
"I think that's an over-simplified solution to current problems ... trying to raise the revenue line instead of trying to cut the cost line," MacMillan said.
The county is required to reply to the grand jury report within 90 days. Board president Adrienne Tissier did not return a call for comment Monday.
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