20 California Counties: $73 BILLION in Unfunded Pension Liabilities

The California Political News and Views has brought you stories about CalPRS, CalSTRS, the UC system, LA DWP, among others having unfunded pension liabilities. Now a report has been made about the twenty counties that have their separate pensions systems. The bad news is that combined, they have unfunded liabilities of $73 billion.

As the costs go up, and due to revenues losses because productive jobs are leaving the State, these counties will join Detroit, Stockton, Vallejo and the State of California in an impending collapse of the systems.

“The report, issued by the California Policy Center, looks not only at pension costs—which are the sole focus of most such previous analyses—but also includes retirement health care costs, along with balances of any bonds counties have had to sell to raise money to pay retirees.

The 20 counties, with a combined population of 29.3 million, have a total unfunded liability for their pension systems of $37.2 billion. But, the study says, when you add pension bond obligations and unfunded health care liabilities, the unfunded total nearly doubles, to $72.3 billion.”

calpers

A Time Bomb That Needs Defusing

Mountain News, 5/13/14

There’s good news and bad news for San Bernardino County residents in a new report, issued May 6 by a California think tank.

The report analyzes the level of unfunded retirement liabilities for the 20 California counties that have their own retirement systems. Though they represent just over a third of California’s 58 counties, these jurisdictions make up 77 percent of the state’s population. San Bernardino County is among them.

The good news is that of the 20 counties with their own pension plans, San Bernardino County ranks sixth best when it comes to the unfunded percentage of pensions, pension bonds and healthcare liabilities it shoulders for its retirees.

The bad news is that it its 72-percent overall funding ratio for its out-to-pasture workers still represents a liability of $4,713 per county household.

The report, issued by the California Policy Center, looks not only at pension costs—which are the sole focus of most such previous analyses—but also includes retirement health care costs, along with balances of any bonds counties have had to sell to raise money to pay retirees.

The 20 counties, with a combined population of 29.3 million, have a total unfunded liability for their pension systems of $37.2 billion. But, the study says, when you add pension bond obligations and unfunded health care liabilities, the unfunded total nearly doubles, to $72.3 billion.

Put another way, when you average the money these counties owe their retirees for just pensions, they are 74 percent funded—meaning they can’t cover one of every four dollars that, God forbid, they could be called on to pay. Adding in pension bond and health care costs, though, they could cover just 60 percent of the costs.

In financial circles, when a plan has unfunded liabilities of 20 percent or less, it’s considered healthy. At 72 percent funding, San Bernardino County is far better off than second-worst Los Angeles County, with just a 51-percent ratio, or once-bankrupt Orange County, whose fifth-worst ranking is at 60 percent.

But any county, or any level of government, for that matter, with a substantial unfunded pension liability has big problems, especially since, as the report says, reforms to date have not required public employees to help close the funding gap by payroll withholding.

Should the counties try to reach 100-percent pension funding in a modest 20 years, they would have to earmark amounts ranging from 23 percent of their total budget for Los Angeles County to 2 percent for Tulare County, with San Bernardino lawmakers needing to kick in 10 percent of their budget.

Obviously, that’s not going to happen, because even relatively well-funded San Bernardino County couldn’t afford to slash its level of public services by one-tenth to make sure retired workers continue well fed and cared for.

But serious as the numbers may appear, the scary fact is they’re probably understated. The report says the figures are based on pension systems earning 7.5 percent on their investments, a dubious assumption in today’s economy.

To get an idea of what a drop in earnings might mean, the report says the total unfunded pension liability for all of California’s public employee pension systems, including city, state and schools, is $128 billion, assuming 7.5 percent.

But should that return actually be a more conservative 5.5 percent, their total would skyrocket to $329 billion, and to $450 billion if the average return were just 4.5 percent.

These figures lead to the obvious conclusion—public employees who have yet to retire must begin contributing significantly to reducing their government’s unfunded pension liabilities. After all, it’s the retiring worker, and not the typical taxpayer, who’ll get the benefits.

A commitment to such change is a reasonable expectation for any candidate for public office. We hope those seeking county or state positions in June and November will pledge to do something about this ticking time bomb. If they won’t, voters should support candidates who will.

About Stephen Frank

Stephen Frank is the publisher and editor of California Political News and Views. He speaks all over California and appears as a guest on several radio shows each week. He has also served as a guest host on radio talk shows. He is a fulltime political consultant.

Comments

  1. There is nothing new in this article.

    Problem! The only people not aware of the Pension payouts are the Politicans, Unions & Public Employees.

    We the public must insist the recieptants of this Giveaway pay a lot more into their program

  2. askeptic says

    It would have been nice to list the 20-counties (in alphabetical order) with the amounts of their unfunded liabilities; or, provided a link to the original report that did contain that information.

    Oops!

  3. I retired from S.B. Co., and during my years there I paid heavily into the retirement system. Also, my pay scale was significantly less than I would have earned in the private sector. Why did I leave the private sector? So I would not have to work weekends and nights to maintain a private practice which I did for years. County employees work hard and a lot is demanded of them. They earn every dime – at least in the clinics where I worked.

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