Source: http://yourpublicmoney.com/aaa_version4/14_evidence/14e_retroactive.shtml
Timestamp: 2017-03-27 10:39:15
Document Index: 658377374

Matched Legal Cases: ['art 1', 'art 2', 'art 3', 'art 1', 'art 2', 'art 3']

Pension Increases - More Debt
Holding California County Pension Funds Accountable
General for All Counties
Pension Increases (15% Retroactive) When Unfunded Pension Debt was Over $100 Million
Stories and Evidence
'98 Retiree Healthcare - '02 Board Policy 40 - Diversion of County Contributions - Part 1
'98 Retiree Healthcare - '02 Board Policy 40 - Diversion of County Contributions - Part 2
'98 Retiree Healthcare - '02 Board Policy 40 - Diversion of County Contributions - Part 3
San Diego - IRS - Excess Earnings
Increase Pensions When Already Deep in Debt
Staffing & Compensation Chaos
Deeply Flawed Pension Fund Financial Statements - Part 1
Deeply Flawed Pension Fund Financial Statements - Part 2
Deeply Flawed Pension Fund Financial Statements - Part 3
Assumed Investment Profits Too High
Plans to Increase Debt
County Puts Off Bad News
The Myth of 80% Funding
Numerous Financial Errors
This shows Mendocino County's total unfunded pension debt and payments of Pension Bond debt according to MendoCERA Actuarial Valuations and audited County financial statements as of June 30 of these years:
Mendocino County Unfunded Pension Debt ($millions)
Net Pension Liability*
TOTAL UNFUNDED PENSION DEBT
* Based on market value of Pension Fund assets Mendocino County's Board of Supervisors directed staff to prepare a second issuance of Pension Obligation Bonds (POB) in July 2002. At that moment the County's total unfunded pension debt was $110 million using the true market value of Pension Fund Assets. In December 2002 the County borrowed $92 million from the sale of the 2002 POBs. Some was used to "defease" (simply put - to pay off) some of the balance due on the earlier POBs, but most of the proceeds was paid to the Pension Fund to reduce the balance of unfunded pensions. As of the end of the fiscal year in which the second issuance of POBs was sold (June 30, 2003) the market value of the County's total pension debt was $119 million. Payments on Pension Bonds before the 2002 Bonds were sold were $3.5 million in FY2002. The year after they were sold - FY2004 - Pension Bond payments increased to $8.2 million. The 2002 Bonds increased County debt payments nearly $5 million a year.
To put that in context of our small County, total County spending at that time was about $160 million and local revenues (local taxes and fees) was about $60 million.
Pension Increases (15% Retroactive)
This text and table is on page 1 of MendoCERA's Actuarial Valuation as of June 30, 2008:
In 2002, all the Memoranda of Understanding between the County and the bargaining units were ratified. As a result, the valuation includes the additional cost for the following benefits:
New Benefit Effective Date Past / Future Service
Management Association	31676.12	January 2002 Future service only Department Heads 31676.12 January 2002 Future service only
Confidential 31676.12 January 2002 Future service only
SEIU 31676.12 October 2003	Future service only
Probation Department 31664 October 2003	Past and future service
Safety Members 31664.2 July 2005 Past and future service
Bargaining Unit: SEIU (Service Employees International Union) represents most County employees. The Management Association, Department Heads, and "Confidential" are the upper management and elected officials. Safety employees are Deputy Sheriffs.
New Benefit: The code section of the County Employee Retirement Law that defines the benefits being granted - in this case an increase in pensions. Six months before the BOS directed staff to prepare to borrow $92 million the pension benefits for three groups of County employees were significantly increased. The County's unfunded pension debt at that moment was about $100 million.
Less than a year after the bonds were sold pensions were significantly increased for SEIU and Probation employees. Probation employees got retroactive increases back to when they were hired. Unfunded pension debt at that moment was about $120 million and payments to eliminate unfunded pension debt had increased nearly $5 million a year to a total of about $8 million a year.
Deputy Sheriffs got the same retroactive increases a year and a half later. The County's total unfunded pension debt was $100 million based on the market value of Pension Fund Assets.
Every Mendocino County employee got significant pension increases during years in which the County owed more than $100 million of Total Unfunded Pension Debt.
About 15% of the County's employees received pension increases that were retroactive back to the first day on the job.
From fiscal year 2002 when the first of these increases were granted through fiscal year 2006, the year in which the last of these increases took effect, annual County payments to eliminate unfunded pensions increased from $3.5 million to $8.5 million.
Pension increases were being granted by local governments all over California during this period. Analysis of a number of these increases - especially the retroactive increases - shows these increases were not accompanied with immediate payments to fully fund those increases. This directly caused immediate increased unfunded pension debt. Further - in many places employees agreed to increase their contributions to pay for the additional pensions but their increased contributions weren't anywhere near what they needed to be to fulfill the spirit of those agreements.
I haven't dug as much into this specific aspect of Mendocino County's pension obligations as other aspects of the debt. However - the general consensus is that the wave of pension increases that started with the State's Highway Patrol and other state employees in 1999 and spread throughout the state over the following 6 years or so was a major contributor to today's unfunded pension debt. Here's a couple of reports about this:
SB400 - What Started It All: Click to read excellent reporting from Ed Mendel at Calpensions.com.
Sonoma County - Retroactive Pension Increases: Click to read Ken Churchill's penetrating analysis of how unfunded pension increases slammed Mendocino County's southern neighbor.
I am certain there wasn't enough money in the Pension Fund to invest and this caused about 25% of the County's unfunded pension debt. Although I haven't analyzed this specific aspect of why there wasn't enough money (unlike the other immediate causes in this section) I believe it's highly likely the pension increases granted in 2002 through 2005 were not properly funded, and that caused a significant part of the County's debt.
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