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A Tale of Two Counties

Columnist: Bob Andrews
November, 2013 Issue
Columnist

Bob Andrews
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To quote Charles Dickens, “It was the best of times, it was the worst of times, it was the age of wisdom, it was the age of foolishness, it was the epoch of belief, it was the epoch of incredulity, it was the season of Light, it was the season of Darkness, it was the spring of hope, it was the winter of despair….” When I think about the exceptional quality of Sonoma County’s wines, foods, artisan brews, weather and Green Music Center, it seems like the best of times, the epoch of belief, the season of Light and the spring of hope. But when I think of the continuing public employee pension mess and the money sucked by pensions from other government services, it really seems like the worst of times, the age of foolishness, the epoch of incredulity and the season of Darkness.
 
Why do I keep writing about public employee pension costs? Because the problem isn’t fixed. Our elected officials at the city, county and state level have repeatedly wimped out on meaningful reform. Things will get much worse financially before they get marginally better. Retroactive enhancements of public employee pensions represent a massive giveaway of taxpayer money. Most of all, the mess was avoidable. As an example of what I mean by “avoidable,” here’s a Tale of Two Counties—Tulare and Sonoma—with special thanks to local resident Ken Churchill for valuable number-crunching.
 
Tulare County is in San Joaquin Valley, south of Fresno. The major city is Visalia, population 125,000, compared to Santa Rosa’s population of 167,000. Tulare encompasses 4,824 square miles and is 206 percent larger than Sonoma County’s 1,576 square miles. Tulare County has rivers and Lake Kaweah, holding 185,000 acre-feet of water. Sonoma County has rivers and Lake Sonoma, holding 381,000 acre-feet. Both counties are heavily agricultural, with Tulare being the second-leading producer of agricultural commodities in the United States. The total county populations are similar, with about 450,000 in Tulare and about 490,000 in Sonoma. The major employer in Tulare is the county itself, just as the major employer in Sonoma is the same.
 
Tulare County, as a single employer, had almost 4,200 employees in 2012. Sonoma County had about 3,600 employees. But the total projected 2012 compensation for Tulare’s larger group of employees was $220 million versus $303 million in Sonoma. Sonoma County paid 38 percent more for 14 percent fewer employees. Tulare County’s average pensionable salary in 2012 was $52,384 versus $83,636 in Sonoma County. These are clues about huge financial differences between the two counties.
 
How about Pension Obligation Bonds (POBs)? These are a clever ploy in which cities and counties convince themselves that they’ve actually accomplished something by borrowing money to pay part of the unfunded liabilities of their pension plans. You still owe the money, right? The interest rate might be lower on the bonds than the interest the plan would charge if money was deposited over time. But the big risk is that money borrowed and then deposited to pension plans could lose value due to dire market conditions, such as those occurring in 2000 and 2008. Then the plan sponsors—basically us taxpayers—need to make up the investment losses and pay off the POBs. Tulare County floated $41 million in POB debt versus $592 million in Sonoma
 
County (1,300 percent more than Tulare). Ouch!
 
Tulare County’s normal pension plan funding and POB debt service totaled $36 million in 2012, versus $122 million in Sonoma County—239 percent higher. The unfunded pension plan liability in Tulare County was $119.5 million in 2012, versus $527 million in Sonoma County—341 percent higher. And, last, Tulare County’s total unfunded liability plus bond debt totaled $160.5 million, versus $1.119 billion in Sonoma County—597 percent higher.
 
Why these huge differences? It’s not because the cost of living is so much lower in Tulare County that its employees should be paid less and receive poorer pensions. It’s because Tulare County held the line on salaries and, most important, did not grant the huge retroactive 50 percent pension formula increase that Sonoma County adopted. Tulare’s pension formula held steady at 2 percent of pay times years of service, with normal retirement on or after age 57. Sonoma County’s formula for general employees was raised to 3 percent of pay times years of service, payable on or after age 60. The new formula also applied to Sonoma County supervisors.
 
The aftermath in Sonoma County is a financial debacle. Huge numbers of employees retired, encouraged by pensions that were suddenly much bigger. No employee was required to make a big lump sum payment for the pension increase calculated retroactively. Meanwhile, county pension costs and the unfunded pension plan liability went through the roof. Funding for important county services, like road maintenance, was slashed. This situation has not been fixed. Financially, the residents of Sonoma County are still in the age of foolishness, incredulity, Darkness, despair and crumbling roads.


 

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