Marin's PENSIONS are a time bomb

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2015: 9 years after the Grand Jury found Marin's PENSION programs were a time bomb - it's become a much bigger bomb  

Marin's city and county governments have mounted a retiree debt of as much as $2.3 billion, making the average resident's share of the bill $25,000, a new report by pension watchdogs asserts.

In a "first of its kind rating and assessment," the detailed analysis by fiscal experts associated with Citizens for Sustainable Pension Plans reported the county and its cities have banked less than half the money needed to pay for the retirement benefits they promise.

The report provides a pension primer, compares Marin's situation to Danville, where there is no pension debt, and analyzes agency liabilities from a variety of perspectives, including retiree debt as expressed per household, a measure that brings the issue home.

Corte Madera is at the top of the per-household debt list among Marin cities, while Tiburon is doing the best to make ends meet, according to calculations assuming both the 7.5 percent stock market return that most public pension plans count on, as well as what critics say is a more reasonable 4.8 percent return that requires higher annual pension fund contributions. The debt under the two investment earning scenarios ranges from per household with the first figure assuming a robust stock market, the second a more modest return:

Oct 2019 REPORT Marin County Local Government Reform of Pensions and Other Post Employment Benefits.
 Dick Spotswood :- " Marin’s 10 cities belonging to California Public Employees’ Retirement System collectively owe CalPERS $176.9 million.
San Rafael, which instead of CalPERS, belongs to Marin County Employee’s Retirement Association, has a separate $120.6 million MCERA liability.
Add to that $49.3 million owed by 10 of Marin’s cities for pensions and benefits and another $33.78 million owned by San Rafael for post-retirement medical insurance benefits. ......
Other Post Employment Benefits (OPEBs-Healthcare)   are controllable. Many were adopted decades ago before Medicare was a reality. Why not have all public employees join Medicare?"

Aug 2019 Marin school district pension debt can top $24K per household

May 2018 Marin retirement fund’s average full-career pension: $96,401

Feb 2018 The pension nightmare for California’s cities is getting scarier

oct 2017: Marin County pension contributions to rise. (reduce the fund’s assumed annual rate of return from 7.25% to 7%) when more realistically it should be 4.8%

San Rafael responds to the Grand Jury Report on Pensions - July 2017 (see the original)              SR's Pension Webpage

San Rafael responds to the Grand Jury Report on Healthcare - July 2017 The report was titled "Marin’s Retirement Health Care Benefits - The Money Still Isn’t There"

June 2017: Pension watchdog sues San Rafael a 2015-16 Marin County Civil Grand Jury report that criticized the pension enhancements approved by San Rafael, as well as those by Southern Marin Fire District, Novato and Marin County. The grand jury report, “Pension Enhancements: A Case of Government Code Violations and a Lack of Transparency,” suggested Marin public agencies may have violated statutes for transparency in approving pension enhancements.

San Rafael’s response to the grand jury report was written in 2015 by attorney Michael Colantuono, of Colantuono, Highsmith and Whatley, PC, of Penn Valley, under contract with the city.

June 2017 CALIFORNIA’S PENSION CRISIS How a pension deal went wrong and cost California taxpayers billions.

June 2017: Jury sees $1 billion shortfall in Marin public pensions the report

Jan 4th 2017: Too much resistance to Jerry Brown’s Pension Reforms have done little to rein in costs

Aug 2016: Appeals Court declared that public retirement plans could be reduced,  saying the law merely requires government to provide a “reasonable” pension.

2015 - Marin's pension obligations per-household

7.5 percent stock market return 4.8 percent return Retiree debt totals (assuming a 4.8 percent investment return) Source: Citizens for Sustainable Pension Plans
Corte Madera $16,000  $30,206  $63 million
Tiburon $10,582  $19,523 $19.3 million
Ross $16,068  $30,023 $13 million
Sausalito $15,791  $29,460; $61.5 million
San Rafael $15,667  $29,174; $354.6 million
Larkspur $13,490  $24,633;  $61.8 million
Belvedere $13,349  $24,942; $10 million
San Anselmo $11,527  $20,816; $33.9 million
Fairfax $11,077  $20,188; $19.6 million
Novato $10,694  $19,645 $111.3 million
Mill Valley     $93.7 million
County     $1.5 billion
Marin school district per-household pension debt, using the “market” earning rate of 3% annually:
Debt   School District
116 $24,181.   Ross School District,
319 $16,497.   Shoreline Unified School District,
360 $15,375.   Union Joint Elementary School District,
541 $11,420.   Reed Union School District,
543 $11,398.   Novato Unified School District,
577 $10,715.   Kentfield School District,
583 $10,635.   Larkspur-Corte Madera School District,
607 $9,993.   Mill Valley School District,
688 $8,157.   Ross Valley School Distirct,
691 $8,157   Dixie (now Miller Creek) School District,
712 $7,585.   San Rafael Elementary School District,
733 $7,149.   Lagunitas,
768 $6,410.   Nicasio,
819 $4,991.   Tamalpais Union High School District,
844 $4,224.   San Rafael High School District,
904 $2,277.   Sausalito Marin City School District,
919 $1,786   College of Marin,
948 $1,005.   Marin County Office of Education,
  • The above $'s include the county's $8,181 per household retiree debt, a tab shared by city residents.

The novel calculations are the first to take all agency pension and retiree costs, including health care and bond issue debt, into account for public review. A grand jury review earlier this year covered health debt only, saying city, county, school and special district agencies across Marin owe $522 million for retiree health care, posing a fiscal calamity.

Agencies understate potential liabilities by counting on the stock market to lift investments, but even if optimistic assumptions about 7.5 percent returns pan out, retiree debt mounted by the county and its cities "is a staggering $1.2 billion," according to the 41-page document. At a reasonable 4.8 percent return based on the last decade, the debt for cities and the county swells to $2.3 billion, the report says. Conservative calculations by Stanford academics put unfunded liability for the county Civic Center alone at $2.3 billion.

The failure of elected officials to adequately fund the benefits they have promised, along with pension programs that are "at least 230 percent (more) valuable than an 'average' private plan," and an optimistic belief investments will grow in a booming stock market, add up to "pension roulette" that gambles with the wallets of a future generation of taxpayers, the pension group asserted.

And in what it described as a "call to action," the report concluded with a suggestion that elected officials be replaced by candidates willing to "effectuate change." Further, tax measures such as sales tax increase proposals on next month's ballot should be rejected "until meaningful reform is adopted," the report indicated.

The highly critical report drew a variety of reactions:

  • County Administrator Matthew Hymel recited a list of county moves to rein in costs, including capping retiree health benefits, allocating $32 million last year to chip away at pension liability and becoming the only county in the state to disclose retiree costs on the tax bill. "We are one of only two of California's 58 counties with AAA ratings from the two largest (credit) rating agencies," Hymel added.
  • Corte Madera finance chief George Topor said the city has done a number of things to curb liabilities, noted that cutting benefits requires labor negotiations, and added state reforms will cut costs over the long haul.
  • San Rafael Mayor Gary Phillips said he and others on a city panel will "thoroughly review" the report "in our continued quest to monitor and modify the city's employee benefits plan and related obligations to be certain we have a stable program."

The pension group's report dismissed modest cutbacks made to date, noting they affect new employees. The report, in some respects a sequel to a pivotal 2004-05 grand jury examination that found Marin's pension program was a "bloated" fiscal time bomb, was prepared by experts including Marty Miller, a retired actuary who served on the 2004-05 grand jury, and Bill Monnet of Sausalito, a retired financial manager for firms including IBM, Siemens and Cisco Systems. Little has changed in the eight years since the grand jury report, and in the cases of certain employee groups in Corte Madera, Larkspur, Ross and San Rafael, costs have increased, according to their calculations.

"It's just ridiculous," Miller said of the pension liabilities mounted by Marin agencies. "The nature of the promises has been reckless, and the taxpayers are taking it in the shorts."

"It's scary. It's worse than I thought it was," said Monnet. "I don't think our public officials are being honest with the public about the financial state of our pension liabilities."

Among other findings of the 2015 report:

  • • Pension debt quickly balloons. In 2005, Sausalito's pension debt totaled $5.3 million, but by June 30, 2011, the city's debt was "at least" $17.6 million but "could be as great" as $48 million.
  • • In 2003, the county issued $112 million in pension bonds to refinance pension debt, but by June 30, 2012, still owed $110 million on the bonds — and had incurred an additional unfunded liability of $371 million. "In only nine years the county's total pension debt had increased by more than 400 per cent to $481 million."
  • • San Rafael, Corte Madera, San Anselmo and Fairfax provide retirees with benefits that are "300 percent as valuable" as private sector pensions. The others offer plans at least 230 percent more valuable.
  • • Most Marin cities calculate pensions based on factors including final year of salary. Only the county, Fairfax and Ross use an average of the final three years of salary, a move that curbs spiking, or inflating final salary to inflate pension benefits. Most programs provide a 2 percent cost of living increase, but San Rafael provides 3 percent.
  • • More than half of the total debt of the county and all cities is retiree debt "or debt for past services rendered to past residents" an "alarming" social inequity.
  • For every $1 of payroll in San Rafael, taxpayers pay another 64 cents to cover retiree costs, an "astonishing" 64 percent cost compared to 17 percent in Tiburon, and 19 percent in Belvedere.

The report is posted at   Contact Nels Johnson via email at

Appendix E: FY 2016 Public Agency Balance Sheet Data (2017 Grand Jury Report)



Pension Liability

Pension Liability
% of Cash









 Mill Valley








San Rafael








County of Marin




 Corte Madera












San Anselmo












Pension Benefits

While the Bankruptcy Code grants no special priority to pensions, the California Supreme Court has recognized a strict “vested right” in public employee pension benefits under the California Constitution (the so-called “California Rule”). Any modification of active employees’ vested pension rights must, among other things, “be accompanied by comparable new advantages.

” Marin Ass’n of Pub. Employees v. Marin Cty. Employees’ Retirement Ass’n, 2 Cal. App. 5th 674, 697 (2016) (citing Allen v. Board of Administration, 34 Cal. 3d 114, 120 (1983).

And the pensions of retirees are to “receive an extra measure” of protection beyond that.3 Id. at n.19.

In the Stockton case, CalPERS asserted that the California Rule prevented pension obligations from being modified under a plan of adjustment (though, in fact, Stockton was not seeking to impair pensions).4 In re City of Stockton, 526 B.R. 35, 55-56 (Bankr. E.D. Cal. 2015). The bankruptcy court rejected CalPERS’ argument, ruling that

3 Recent decisions of the California Courts of Appeal have called the inflexibility of the California Rule into question. Alameda Cnty. Deputy Sheriff’s Ass’n v. Alameda Cnty. Employees’ Retirement Ass’n, 19 Cal. App. 5th 61 (2018); Marin, 2 Cal. App. 5th 674. Marin allowed “reasonable” modifications to the pensions of active employees without a comparable new advantage. Marin, 2 Cal. App. 5th, at 697-700 (2016). The Alameda court disagreed with the holding of Marin. It would permit changes only if there were “compelling evidence” that the changes were necessary for continued operation of the pension system. Alameda, 19 Cal. App. 5th at 123. The issue is expected to come before the California Supreme Court shortly.

4 Because Stockton did not attempt to impair pensions, CalPERS did not oppose the plan of adjustment. Rather, the bankruptcy court decided the issue because an objecting capital markets creditor argued that Stockton should be required to impair pensions. Stockton, 526 B.R. 35.

 the Bankruptcy Code preempted a California statute (Cal. Gov’t Code § 20487) that purported to limit the rejection of pension contracts.
The bankruptcy court concluded that pensions contracts could be rejected and pensions may, as a matter of law, be modified by a chapter 9 plan of adjustment. 526 B.R. at 62.
The court reasoned that pension rights are contract rights. And, while a state may decide whether or not its municipalities can file for bankruptcy, the debtor’s ability to impair contracts under the Bankruptcy Code is available to states only on “an all-or-nothing, take-or-leave-it basis.” Id. at 55.
Thus, if a state allows its municipalities to file for bankruptcy, it cannot prevent those municipalities from impairing particular contracts. See id. at 57.

Had Stockton rejected or otherwise attempted to impair its contractual relationship with CalPERS, it could then be liable for the CalPERS termination charge under Cal. Gov’t Code § 20577. CalPERS asserted that Stockton would owe $1.6 billion, but the bankruptcy court suggested that CalPERS would not have been able to enforce its statutory lien under Cal. Gov’t Code § 20574 because certain liens can be avoided (made unenforceable) in bankruptcy cases.
If that were the case, CalPERS’ termination charge would have been only a general unsecured claim in the bankruptcy.
The statutory lien issue was not actually litigated in the recent Stockton or San Bernardino cases, and no California bankruptcy court has yet addressed the enforceability of the lien.

The bankruptcy court in Detroit followed Stockton on bankruptcy impairment of pension obligations, holding that the city could impair pensions notwithstanding the Michigan State Constitution provided that pensions and retirement benefits were contractual obligations that could not be impaired. In re City of Detroit, 504 B.R. 191, 244 (Bankr. E.D. Mich. 2013).

Despite the Stockton bankruptcy court’s ruling that pension contracts could be rejected and pensions could be modified, Stockton did not reject its agreement with CalPERS or attempt to modify pension benefits under its plan of adjustment. San Bernardino made a similar decision in its chapter 9 bankruptcy.
Both faced the same fundamental issue: pensions are a crucial component of employee compensation, and there is no pension administrator in the marketplace comparable to CalPERS.
Rejection of a CalPERS contract would have chilled negotiations with unions and retirees, and might even have precipitated a mass exodus of employees. However, the continuing rise in pension costs will no doubt lead cities to seriously consider attempting to impair pension obligations in future chapter 9 cases.

Both Stockton and San Bernardino were ultimately able to reach new CBAs and other agreements with unions and retirees that provided substantial pension savings for the cities.
Stockton reached some of those agreements before bankruptcy, while San Bernardino first imposed the changes unilaterally in the first few months of its bankruptcy case, then moved for bankruptcy court approval of rejection of the Collective bargaining Agreements ( CBAs), and finally reached consensual agreements with the retirees and new CBAs with the unions that were implemented under the chapter 9 plan.
San Bernardino’s new CBAs included a variety of provisions that reduced pension and benefit costs, including:

  • requiring employees to contribute the full statutory employee rates,
  • eliminating the employer paid member contribution,
  • removing pension-spiking provisions,
  • reducing accruals and cashouts of leave time,
  • modifying retirement health benefits, and
  • other related changes.