Nevada County- Unfunded Liabilities

Transcription

1 Nevada County- Unfunded Liabilities Michael McDaniel Executive Director- SESF

2 "I don't want to sugarcoat anything. We are facing decades without significant turnarounds in assets, decades of unsustainable pension costs of between 25 percent of pay for a miscellaneous plan and 40 to 50 percent of pay for a safety plan unsustainable pension costs. We've got to find some other solutions. - Ron Seeling- Chief Actuary for CalPERS (September 2009)

3 FACT (Misc plan) The County of Nevada is responsible for payment promised to retired employees, not CalPERS.

4 FACT Unfunded Liability for Misc Employees through June of 2009 is estimated at over $83,000,000. Math: June Entry Age Normal Accrued Liability of $248,063,046 minus Market Value of Assets (estimated June ) $164,137,323 equals the unfunded amount of $83,925,723. Net of the CalPERS 1% annual admin fee the UL jumps to $88,552,776.

5 FACT County ongoing employer contributions to Miscellaneous and Safety employee pension plans are 17% and 33% of salary, respectively- for every $100 of salary another $17 is spent on pension benefit for Misc employee and $33 for Safety employees. These contribution amounts DO NOT take into account the recent market crash.

6 Fact Nevada County pays 67.68% of the EmployEE contribution amount for Misc Employees and 100% of the employee contribution amount for Safety Employees These contributions are IN ADDITION to the employer contributions The EE contribution for our Misc Group is 8%. Of this the individual employee pays 2.585% and the County pays the balance on behalf of the EE. In the case of Public Safety Group the EE contribution is 9% and the County pays the full 9% on behalf of the EE

7 Fact County ongoing contributions to Miscellaneous and Safety employee pension plans are % and 42% of salary, respectively- for every $100 of salary another $22.41 is spent on pension benefit for Misc employee and $42 for Safety employees. These contribution amounts DO NOT take into account the recent market crash.

8 FACT CalPERS uses an expected Rate of Return of 7.75% for their present value calculations. 7.75% net of CalPERS admin fee

9 FACT ( Sidefunds ) It is not required that the County include the Unfunded Liability on its financial statements (taxpayers and entities which loan funds to the County are not informed of this material fact).

10 FACT CalPERS summary reports provided to the County are 2 years behind. The 2009 summary statement does not include the 2008 market crash.

11 SUGGESTIONS Note: Many of the following suggestions were first pointed out to Nevada County Supervisors in December of 2007 via the SESF Technical Report Nevada County- Our Community s Fiscal Time Bombs. This report is still available for download at

12 Suggestion #1 Establish a Pension Review Committee to help find and analyze additional solutions available at the County Level. I suggest no more than 5 members that have access to county financial information and attorneys. I further suggest that you reserve space on January 2010 BOS meeting to discuss the committee s findings.

13 Suggestion #2 Pass a resolution requiring that a Tax Payer Advocate attend future employee compensation negotiations (currently, the perception is that no one is at the bargaining table for the tax payer during employee contract negotiations).

14 Suggestion #3 Pass a resolution requiring public approval (via a ballot measure) for all future positive pension plan amendments

15 Suggestion #4 Request that CalPERS use a more realistic expected rate of return for their calculations (use 4.5% instead of 7.75%, for example) Note:4.5% was an alternative suggested by the Governor Schwarzenegger's report on OPEB liability

16 Suggestion #5 Disclose Nevada County Unfunded Liability on your financials.

17 Suggestion #6 Pass resolution denying the improvement of Pension plan benefits from all future employee negotiations.

18 Suggestions #7 Aggressively petition our State Legislators to allow you more tools to solve this crisis (leverage your voice via using your affiliation with the Rural Counties organization). Insist that they change the current pension plan into a 2- tiered system. Tier 1- Current and past employees see no change Tier 2- New employees have Defined Contribution plan instead of Defined Benefit plans, for example.

19 Suggestion #7 (cont) Actively support THE PUBLIC EMPLOYEE BENEFITS REFORM INITIATIVE sponsored by The California Foundation For Fiscal Responsibility. (

20 Suggestions 8-12 (courtesy of Marcia Fritz) Discourage early retirements later retirements lower pension and OPEB costs. Reduce compensated time off which reduces OT. Adopt use it or lose it polices for accrued vacation and sick leave avoid cash outs. Grant pay increases based on production, not pulses. Adopt 2nd tier pension benefits that extend retirement ages for new workers.

21 Suggestions (courtesy of Marcia Fritz) Suspend earning of service years temporarily Suspend COLAs for retirees temporarily Discontinue airtime purchases at bargain prices Eliminate ability of employer to pick-up employee contribution End reciprocity and pension spiking Standardize disability processing for public safety worker claims Levy a windfall pension tax on recent retirees whose pensions exceed a specified $ amount

22 "I don't want to sugarcoat anything. We are facing decades without significant turnarounds in assets, decades of unsustainable pension costs of between 25 percent of pay for a miscellaneous plan and 40 to 50 percent of pay for a safety plan unsustainable pension costs. We've got to find some other solutions. - Ron Seeling- Chief Actuary for CalPERS (September 2009)