Riverside County to Review Pensions

Sparked by Riverside County Supervisor Bob Buster’s concerns that rising pension costs could create financial havoc, the Board of Supervisors on Tuesday ordered its top administrators to review the financial soundness of the county pension system.

Buster said an error made by the city of San Diego that led to fiscal crises earlier this month also had occurred in Riverside County: Local governments increased pension benefits during flush economic times, and those benefits could not be sustained over the long run, he said.

Treasurer Paul McDonnell said the county is in much better shape than many other local governments -- 92% of its projected pension costs are funded, compared to 76% in San Diego County and 79% in Orange County. Still, the county’s long-term pension costs are underfunded by $300 million.

“The concern about the pension system is well-placed,” he said. “I think it’s important that we learn from our past experience.”

The problems stem from the prosperous late 1990s and early 2000s, when a strong stock market meant the county’s pensions were well-funded and it appeared there was more than enough money to meet pension needs. During such times, counties can elect to postpone paying their annual contributions, and Riverside County did this for two to three years, while also increasing pension benefits, McDonnell said.

Now that the stock market has declined, the pension fund faces a $300-million shortfall that the county must make up, on top of making regular pension payments.

In the current fiscal year, the county is paying $119 million into the pension fund, with nearly $25 million earmarked for making up the shortfall.

Buster’s proposal calls on the county executive office, budget staff and treasurer to develop detailed projections of pension costs; to develop a policy that in future windfall years, excess money will be saved for leaner times; to include a budget official in labor negotiations; and to study alternatives, such as reducing benefits for newly hired workers.

The board’s 5-0 vote called on county staff to study the matter and report later this year.