Tuesday, December 24, 2019
[Santa Barbara County] Our View: Facing up to a huge fiscal pit
Blog note: this editorial references a grand jury report. Scroll to the end.
If you’re in the mood for the onset of a serious, brain-numbing headache, try to figure out how much of a hole California and local governments are in when it comes to meeting retiree pension/benefits obligations.
We spent more than enough quality time online trying to track down some hard-and-fast numbers, and it was like trying to figure out your 1040 tax return.
And yes, we came away with a headache. A big one. But the real headache likely belongs to residents of Santa Barbara County, and its municipalities.
The easy way to explain this is to say just about everyone in the region is in serious trouble — except for a handful of retired government employees, a select few of whom are pulling down a bigger paycheck in retirement than they did while still on the job.
For example, a former sheriff and his deputy undersheriff in a nearby county are being paid 20 percent and 30 percent respectively more than their working pay levels. Both are being paid more than $250,000 a year in retirement.
They, and others, received this gift from a gimmick called “salary spiking,” rules that allow those who are planning retirement to add unused vacation time, sick days, cost-of-living adjustments and various bonuses to artificially inflate their final year’s salary, which counts when calculating a final retirement package.
That’s just one of the ways state and local governments’ pension programs have gone terribly wrong. Another is that, in typical short-sighted decision-making, government officials banked on having a steaming-hot economy, making promises that could not be kept when the economy inevitably goes south for a couple of years.
That happened in the late 1990s when California Gov. Gray Davis signed legislation allowing early retirement and “enhanced benefits” for state workers. A few years later the state’s hot economy iced over — but the pension deal stayed in place.
Davis was asked in 2016, if he had it to do over again, would he have given up so much in the pension rules, and he said absolutely not, all but admitting that government leaders tend to do dumb things when it comes to dealing with pension issues.
The end result is that the state, counties and cities remain on the hook, facing unsustainable pension demands that, ultimately, will probably become the taxpayers’ responsibility.
The nut to crack is huge. In 2016, the California Policy Center identified five California counties whose contributions to pay pension demands exceeded 10 percent of total revenues — and Santa Barbara County topped that list, at 13.1 percent. The most recent figure we could find on the county’s pension debt was $845 million.
A Santa Maria city manager’s report last year listed the city’s biggest General Fund challenge as “soaring pension costs,” in part because of investment losses sustained by pension funds in the Great Recession. The report expects the city’s General Fund’s pension-related expenses to increase by more than $4.8 million through 2022.
This is not one of those problems that just goes away if you ignore it. Nearly one in nine people living in California belongs to a public pension plan, so the meter continues to run.
This is not a new problem. Public pensions have, for the most part, been underfunded for the past two decades.
A Santa Barbara County Civil Grand Jury report a couple of years ago recommended county and city governments get together and work toward a common solution. We often don’t agree with grand jury conclusions, but that one is spot-on.
December 10, 2019
Santa Maria Times