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Auditor’s report: County’s unfunded liability on the rise

By From page A4 | August 30, 2017

Auditor-Controller Joe Harn wrote the El Dorado County Board of Supervisors to inform them that the county’s unfunded obligation to CalPERS has risen to $346 million.

“The most recent report of our financial position with CalPERS is as of June 30, 2016. Since CalPERS investment earnings for the year ended June 30, 2016, were dramatically less than estimated, our unfunded obligation increased by more than $64 million since our last CalPERS actuarial report,” Harn said.  “Further, CalPERS has informed the county that seven years from now the required annual payments to CalPERS will be $22 million per year higher than they are now. Balancing the county’s budget and providing critical public safety and road maintenance services will become much tougher in the future because of our unfunded obligation to CalPERS.”   

In 1999, in order to payback public  employee unions for massive campaign contributions then Gov. Gray Davis and a super majority of the state Legislature passed SB 400, which allowed the state, counties, cities and special districts in California to offer employees drastically enhanced retirement benefits retroactively.

Then state Assemblymen Tom McClintock voted against the bill because the benefits were clearly unaffordable and the numbers didn’t make sense.  At the time, McClintock stated the cost projections for the enhanced pension benefits were based on “wildly unrealistic predictions of CalPERS future performance.”

McClintock was right, according to Harn.

“CalPERS gave the county ridiculously low cost estimates in 1999. CalPERS projected that the retroactive application of dramatically enhanced retirement benefits would not increase the cost to the county for the next 11 years,” the auditor said.

Ignoring the advice of the auditor-controller and ignoring the judgement of McClintock, county supervisors in 1999 and 2000 accepted the ridiculously low cost estimates provided by CalPERS and offered county employees dramatically enhanced retirement benefits on a retroactive basis, Harn explained. It should be noted that the El Dorado Irrigation District and just about all of our surrounding counties have more lucrative and expensive retirement plans than El Dorado County does, he added.    

“The huge increase in CalPERS costs is going to adversely affect our fire districts as they continue to attempt to provide fire and emergency medical services in our county,” Harn continued.

“The county needs more tools and options that are not currently available to reduce these unaffordable and insurmountable unfunded obligations,” he said. “The Board of Supervisors should seek the assistance of California State Association of Counties, CalPERS and our representatives in the Legislature so that changes in state law and CalPERS policies will provide better options to enable us to reduce these unaffordable obligations.  What we can do locally now is work to set aside significantly more funds in our reserves to help cover these costs in the future.”   

Harn also noted that getting out of CalPERS is not an option at this point. Included in CalPERS’ most recent report was the price to withdraw from CalPERS which would more than $1 billion.

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