SLO County’s employee pension fund, which already performed among the poorest in the country, slipped still further in a recent ranking and is even more under-funded than was previously thought.
According to a new report by the fund’s outside consultant, the investment performance of the fund fell from the 98th percentile among similar funds over the past five years, to 99th. In a recent presentation to the Pension Trust, the fund’s manager said the abysmal performance compared to other funds is a result of the fund being conservative when the market was booming and, more recently, of being heavily invested in corporate bonds, which did very poorly.
The fund, which will pay the future pensions of some 2,600 county current employees, is governed by a panel of county officials and elected officers based on advice from Scott Whalen of Wurts & Associates and more than a dozen other consultants.
Whatever the cause of the declines, the continuing poor performance deepens myriad pension-funding problems created by the recent market downfall and has fueled threats of a lawsuit on the part of one county employee union, whose officials argue the county has improperly tried to make employees split the costs of pension shortfalls.
Speaking to the board, Ann Duggan of the Deputy County Counsel Association argued that union members should only be responsible for costs related to the actual operation of the pension. Instead, she said, union members have been held responsible for costs coming from long-term underfunding of the trust.
Such concerns are only likely to increase, given other new figures from a recent actuary’s report on the pension fund.
According to that report, the recent market downfall as well as the county’s poor investment returns have left the county owing, in the long term, far more than it has on hand.
The “funded ratio”—which long was required to be a minimum of 90 percent before that safeguard was abandoned in recent years— slipped from 78.5 percent to 73.5 percent in the last year. In other words, while the pension fund has obligations worth $1.15 billion, it has $304 million less than that.
Actuary Leslie Thompson told the board the shortfall means the county will have to increase contributions by likely 2 percent of total payroll, amounting to several million dollars, assuming the increases aren’t implemented until next year. Also, because last year’s market losses will be phased in to the numbers over a five-year period, contribution increases are likely to be demanded over the next several years. In recent years, those costs have been split between the county and employees.
Among other statistics revealed in the report:
• In 2008, the total payroll for active pension members increased from $162 million to $168 million and the average pay for members climbed 4 percent to $63,484.
• There were fewer retirements reported last year—63 as compared to 104 the year before. Thompson speculated that was a result of older workers choosing to hold on to their jobs longer.
• The average age of members is nearly 48, and their average service is 10 years.