Inland Valley Bulletin: San Bernardino County Pension Vote

San Bernardino County pension board votes to end special benefits for retirees

By James Rufus Koren Staff Writer

Inland Valley Daily Bulletin

Created: 04/07/2011 09:10:13 PM PDT

Thousands of retired government workers will have to get by with less starting later this year, after the leaders of San Bernardino County's retirement fund voted Thursday to end an account that has paid special benefits to retirees for more than a decade.
 
A sharply divided San Bernardino County Employees' Retirement Association board voted 5-4 in favor of ending the so-called General Subsidy. County Treasurer-Tax Collector Larry Walker and members appointed by the county Board of Supervisors voted in favor, while members elected by retirees and current county employees voted against.
 
Those in favor said ending the subsidy would shore up the financial stability of the county's pension fund, while those opposed said the subsidy - which was set to expire in a few years - is vital for many retirees and doesn't cost that much.
 
"It was a blow to a lot of people who depend on the subsidy," said Sue Shuey, president of the Retired Employees of San Bernardino County.
 
The vote came after more than two hours of discussion and public comment, during which nearly two dozen county retirees - of the more than 100 who attended the meeting - told board members how losing the subsidy would hurt them.
 
The subsidy provides between $115 and $230 per month for more than 7,000 retirees.

"I make less than $1,000 a month. Take this away and I'll make less than $700 a month," said Dorothy Lueking, a retiree who started working for the county in 1954 as a clerk in the county library system. She said the board looks at money as one lump sum, while "retirees look at each dollar representing a blood pressure pill or part of a loaf of bread."

 

The key issues raised at Thursdays meeting were the amount of money set aside to pay for the subsidy - about $40.6 million will be left after payments stop in October - as well as where that money came from and where it will go now.

 

The money will be used to partially offset the payments owed to the pension fund by San Bernardino County and the other public agencies whose employees have their pensions through SBCERA.

 

For San Bernardino County, that will mean a discount of about $2.9 million each year for the next 20 years.

With the county facing a growing budget deficit over the next five years, Mark Kirk, an aide in County CEO Greg Devereaux's office, said that money starts to add up.

 

"Over the next 5 years, there's a $122.5 million shortfall for the county, and of that, approximately $72 million is from increased retirement costs," he said. "So when you start talking about $2.5 million or so a year in each one of those years, you start eating good chunks of that."

 

Harry Hatch, an alternate SBCERA board member who represents retirees, called the move a "backdoor" maneuver to give money to the county.

 

Neal Waner, a board member appointed by the county supervisors, said it's true that the transfer benefits the county, but he said it also benefits the pension fund by helping make sure it can meet its future obligations.

"We're helping the county and also helping you," he told those at Thursday's meeting. "The purpose of this board is to protect the integrity of this asset for you and for future retirees."

 

Retirees countered that $40.6 million is a tiny sum compared to the billions in assets controlled by SBCERA.

"Forty million over 20 years? That's a drop in the bucket," said Rich Beemer, a retiree and former county undersheriff.

 

But Walker said no amount of money - not $40 million, not $2.9 million - is insignificant to the county or the retirement board.

 

"I'm just not persuaded by an argument that that particular amount of money wasn't important," he said. "I've never been in a situation where $3 million wasn't important."

 

`Excess earnings'

Walker and the other board members who voted in favor of ending the subsidy and transferring the funding said the fund that paid for the subsidy never should have existed.

 

Beginning in 1996, the general subsidy was paid for out of an account funded by excess earnings - that is, earnings above the retirement board's expected returns. Walker said Thursday that the excess earnings that went into the account weren't excess at all.

 

"I don't believe in excess earnings," he said.

 

SBCERA, like other public pension funds, assumes a set rate of return on its investments. For SBCERA, the assumed rate is 8 percent.

 

"If we've picked the right target, for every dollar above the goal, we would later on be one dollar below the goal," he said. "If 8 percent is the right number, there's no such thing as excess earnings."

 

County CEO Greg Devereaux said the same thing. And he said SBCERA erred by putting excess earnings aside in the past and using them to pay for extra benefits.

 

"If you have to average 8 percent, you can't give away the good years," he said.

 

The SBCERA board hasn't set aside excess earnings for some time, and board members Thursday said rules have changed so that it would be much harder to do so in the future.

 

Which is why, retirees said, the board should leave the remaining money in place and allow the subsidy to continue until the money runs out.

 

"We all thought this money would be allowed to run out," said SBCERA board Vice Chairwoman Dawn Stafford, who represents retirees.

 

During and after the meeting, retirees made it clear they they would make their feelings known at the ballot box.

 

"Our vote counts," one retiree told the board. "Please don't make us vote in new people."

After the meeting, a retiree said, "Now we know who we're voting for and who we're not voting for."