The Santa Barbara County Board of Supervisors recently received a status report on the Santa Barbara County Employee Retirement System, also known as SBCERS.
SBCERS is a semi-autonomous agency that covers the 4,300 employees (and 4,906 current retirees) of the county in addition to the employees and retirees of a few local special districts.
There are a few things you should know about our county government pension system. First, it guarantees government employees a percentage of their final average salary for the rest of their lives. The amount of the pension is a function of the employee’s years of service and the final highest year’s salary multiplied by 2-3% depending on the terms of the employee’s union contract.
On the surface, it appears that sheriff deputies and firefighters get the highest pensions (which I am supportive of). But that is misleading because many of the rank-and-file employees of the county also get Social Security in addition to their county pension (I don’t believe they should get both!).
Added together, Social Security and a government pension put most all employees on par with sheriff deputies and firefighters with respect to pensions.
Another thing you need to know is that the pension payments are mostly dependent upon stock market returns. The employees rarely pay more than a few percent of their current salaries into the pension fund. The bulk of the payout comes from investments.
However, over the long term, returns have been insufficient to cover the long-term liabilities. This requires that the county (the taxpayers) cover investment shortfalls by contributing an average of 41.4 cents towards pension costs for every dollar in regular payroll.
All told, the average cost, fully loaded, of a county employee is $160,000 per year. The total cost of salaries and benefits is now $760 million per year.
The report, which the county supervisors received, indicated that several outstanding years of investment returns have achieved a 90% funding level for the pension fund. The outstanding returns included what many believe to be an all-time whopping 25% return last year.
So that is the good news.
The bad news is that what goes up must come down.
For the moment, the pension fund appears to be 90% funded, but that doesn’t tell the whole story. Back in 2008, the stock market took such a deep dive the fund lost over $1 billion!
Since 2008, the county has had to invest several hundred million dollars more than they would normally contribute to keep the beneficiaries whole. And they won’t be done with those payments for another eight years, that is, unless the market tanks again!
What is bothersome here is that because the fund is temporarily at 90%, county supervisors are asserting that the pension plan is “sustainable.” That statement is based on nothing less than a snapshot accounting gimmick. If the plan was sustainable, the county would not have had to augment the fund with hundreds of millions of dollars over a 20-year period.
It is noteworthy that 23 department heads, including five who are elected, can make up to $244,572 per year and they want a raise! Their salaries are so high, that many will have a retirement that is the envy of millionaires!
Somebody in the private sector would have to sock away millions to get the same payout they will receive. Accordingly, our elected leaders are enmeshed both personally and ethically in the unsustainable salary-pension predicament.
It is a tragedy and travesty that our elected leaders are more committed to county employees than they are to the interests of the taxpayers who elected them in part to safeguard the peoples’ finances.
The system is clearly unsustainable, and county services and infrastructure are being shortchanged as a result.
Andy Caldwell is the COLAB executive director and host of “The Andy Caldwell Show,” airing 3 to 5 p.m. weekdays on KZSB AM 1290, the News-Press radio station.