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:
|Jan 4th 2017: Too much resistence to
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
Marin's pension obligations
||7.5 percent stock market
||4.8 percent return
||Retiree debt totals (assuming a 4.8
percent investment return) Source: Citizens for Sustainable
|| $63 million
|| $61.8 million
- 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
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
- 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
"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 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
www.marincountypensions.com Contact Nels Johnson via email at
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