O C Supervisors get a lesson in retirement math

According to The Voice of OC, in a story headlined “OC Supervisors Split on Sheriff Deputy Pay Package,” at least two members of the five person Orange County Board of Supervisors (Shawn Nelson and John Moorlach) appear to be getting cold feet over the prospect of voting to approve a pay package with the Orange County Association of Deputy Sheriffs after, according to Supervisor Todd Spitzer’s statement reported in this Voice article, the deal points were agreed to by the Supervisors in March. Now the deal has been hammered out and approved by vote of the Deputies. Supposedly back in March the Board majority sent a signal that they would cave – er, approve – the agreement that calls for the Deputies to receive a raise by the end of three years to offset the Deputies spending that 9% on an increased pension contribution. In other words, the county will wind up paying for the increased pension contribution but the money will be run through the Deputies’ paychecks.

One might think that makes it a wash. But not so, because this deal would drive up future retirement benefit levels for the Deputies and that is an outcome that is like pouring gasoline on the barbeque of the increasing number of political activists – known in some circles as “Lincoln Club types” – that want to see public sector pension benefits and related costs reduced, if not eliminated. If this deal goes through, the so-called $100,000 Club – those county retirees who draw 6 figure annual retirement paychecks – will grow significantly as the current group of Deputies retire in the future, another outcome that the anti-public pension crowd views with terror.

It appears that at least some Supervisors did not figure out until the last minute that when you increase the pay of workers it translates into increased retirement income for them when they eventually retire and in the meantime it increases the highly publicized $5 billion county retirement fund’s unfunded liability while setting the table for more members of the $100,000 club. According to The Voice, Supervisors Nelson and Moorlach are expressing concerns about this retirement fund and pay impact, with Nelson labeling it a pension spike, while Supervisor Spitzer is telegraphing that it’s a little late to balk at a scheme that the Board signaled in March it would agree to.

So, can it be that at least some Supervisors don’t understand the basic math that when employees’ wages go up, their future retirement pay which is based upon their wages will also rise?  Or, is this just last-minute posturing by Nelson and Moorlach, who’ve built a reputation of being anti-public pension and fiscally conservative when it comes to employee pay and benefits?  Or does it come down to the deafening silence on this issue so far from Supervisors Bates and Nguyen?

It will be darned hard for any Supervisor to maintain an image of “pension reform zealot” if they vote for this deal. On the other hand, assuming that Spitzer is correct in stating that deal points were approved in March, isn’t a deal a deal?

By the way, the Sacramento Bee just put out an editorial entitled “Pension Reform Comes at a Price,” stating that Sacramento County is implementing a similar 9% for 9% deal as a result of an arbitrator’s ruling. In addition, Deputies will actually pick up another 3% of the pension cost there. Let’s hope the politicians there did the math, as the way I figure it that while the Deputies there will be picking up as much as 12% of their retirement costs, their eventual retirement pay will be going up by at least 9% and the $100,000 Club there will grow even more in future years.

So, the Orange County Board of Supervisors is not alone in trying to deal with the hue and cry that employees, including Deputies, should pay a greater share of the cost of their own retirement plan. What they are apparently learning is that when the employees are handed the money by the County to pay for it, the employees will see an increased retirement pay when they finally retire, and right away the pension fund liability increases and the $100,000 Club of the future grows. Can it really be that some Supervisors did not figure this out a long time ago?

Nelson is quoted as saying this deal would blow a hole in the County budget. Of course, a few months ago he said the same thing when the County received a ruling that it had engaged in unfair labor practices while bargaining with the Attorney’s bargaining unit.  In fact, Nelson was quoted as predicting layoffs of county employees to pay for the impact of the package the Attorney’s unit would receive.  But just last month the County budget hearings were conducted without a hitch.  The hearings went so smoothly that it was almost a love fest, and there were no layoffs required to fund that budget even while paying next year’s share of a payback to the State of millions due to another adverse ruling received by the Supervisors.  Perhaps the old “the sky is falling” cry from Nelson and Moorlach is getting a bit hard to believe – though Moorlach would undoubtedly point out, for the umpteenth time, that he was right when he predicted the county bankruptcy 20 years ago.

Pay now, pay later. Or, is it both? And, is this pension spiking or just the way it is? Who will take the blame for growing the $100,000 club? And who will succeed in keeping their fingerprints off a decision to approve the deal?  Interesting times we live in…