County leads region in reducing retirement costs

By Union Democrat staff January 14, 2011 09:55 am
    Tuolumne County and its employees have taken a very important step in reducing mushrooming retirement costs.
    Last week county supervisors approved a pension-reduction agreement with the Deputy Sheriffs Association. This means the county in less than a year has reached such agreements with all its employee bargaining groups.
    In fact, Tuolumne is the first valley or foothill county in the Central California area to come to such an understanding with its workers.
    “That’s a real accomplishment,” said Supervisor Dick Pland, who joined the unanimous vote approving the DSA agreement. “We may be small compared to valley counties, but our staff came up to the plate and hit a home run.”
    The crux of the agreements is creation of a second tier of new employees will not enjoy the high, and costly level of benefits current workers do.
        Those hired after March 15 will have to pay their own share of retirement costs, which ranges from 7 percent for most employees to 9 percent for deputies, firefighter, jailers, probation officers and others working in public safety field.
    The new agreement also raises the retirement age for general employees from 55 to 60 and caps their maximum retirement benefit at 60 percent of salary, rather than at 67 percent, after 30 years on the job.
    New safety employees can still retire at 50, but afterwards will only receive a maximum of 60 percent of their salaries rather than the 90 percent existing workers can get after 30 years.
    Finally, salaries on which those benefits are based will be an average of the highest three years of pay, not just the highest single year as it is now.
    County savings from the second tier changes will not be dramatic at first, and may not be appreciable for many years.
    But one thing is clear: Tuolumne County had little choice but to make the changes. The status quo was untenable. Years ahead, said County Administrator Craig Pedro, existing agreements would have cost millions of extra dollars and forced draconian personnel reductions.
    Last year, Tuolumne County paid $7 million into the California Public Employees Retirement System, up from $2 million in 2000.
    The reason for the escalating costs?
    When the economy was booming, CalPERS was a cash cow whose investments topped out at $260 billion before the 2008 crash. In this heady environment, generous retirement packages were handed out — and signed off on by counties and cities — with little thought of financial reversal.
    Many local governments, including Tuolumne County, agreed to cover employee shares of retirement payments — because they could. When the huge system’s investments plummeted, counties, cities and local governments found themselves shouldering more and more of the load.
    That a generation of older workers — the baby boomers — are approaching retirement age, only added to the load. As did tightly stretched state and county budgets that came in the aftermath of the 2008 financial collapse.
    The county’s employer contribution for its safety workers is now 26.7 percent of total salary, plus the 9 percent employee contribution. Under the new agreement, employer contributions have dropped to 13.4 percent of pay, and the county will no longer pay the employee shares.
    With more austere benefits, some critics have said, recruitment could suffer. But more and more state and local agencies have also cut benefits, leveling the employer playing field.
    Much of the credit for the new agreement must go to county employees themselves, who voted against their bargaining unit’s best interests and instead for the good of the county as a whole. Ten employee groups had to endorse the program to put it in effect, and they did.
    The votes tooks courage and foresight, and for that the employees are to be commended.