Higher Pension Costs Mean More Budget Cuts

County Forced to Work with $11 Million Less

Greg Levin, CEO of the county’s retirement system
Paul Wellman

The good news is the bad news. Santa Barbara County public employees are living, on average, a year and a half longer than their counterparts throughout the state, and there are roughly 20 percent fewer deaths expected here than in the rest of California. The bad news, then, is that the county government has to pay more for their pensions.

“That drives the cost of the plan up,” retirement system CEO Greg Levin told the county supervisors on Tuesday.

Santa Barbara’s extended life expectancy is just one small explanation for the county’s mounting pension woes. Because of an arcane decision made by the retirement board last December, the county supervisors will have less to work with this year than they thought. That translates to $11 million worth of budget cuts.

“It’s going to hurt all over,” said County Supervisor Das Williams, noting cuts to parks, mental health, and public safety. “We may be forced to lay off a huge number of largely new employees.” He estimated the number could be in the hundreds.

This bloodletting will begin next week at the County Administration Building. The department heads are bringing budget plans that reduce their general fund allocations by 5 percent. Hardest hit will be the Sheriff’s Office, which receives $128 million annually in general funds. The second highest recipient is Probation, which gets $54 million.

Conservative watchdog Andy Caldwell charged the county supervisors failed to plan for this eventuality. But it’s important to note every other city and county in the state is struggling with pension problems.

Exactly how the county supervisors will handle this deficit will be hashed out over the coming months during budget deliberations and union negotiations.

Public pensions are funded by returns on investments overseen by the Board of Retirement for the Santa Barbara County Employees’ Retirement System. Last year, the investment returns fell short, and therefore the county government is contractually obligated to pay more to the pension system. Exactly how that difference is calculated is subject to political debate.

Last December, Santa Barbara’s fiscally conservative-leaning retirement board opted to do what liberals charged was a drastic move. They forced the county supervisors to pay a much bigger piece of the pension fund. The decision is still argued about.

Conservatives, meanwhile, complained the county supervisors have squeezed the county budgets tighter by giving out pay raises and a week of vacation between Christmas and News Year’s Day.

This heavy lifting will eventually get lighter. In 2013, the State Legislature passed a bill known as PEPRA, or California Public Employees’ Pension Reform Act. It means new employees ​— ​hired after 2013 ​— ​would receive smaller pension benefits than those hired before that year. “In theory, if we achieve what we set out to do, the cost will go away,” Levin said.

But should the county government be forced to lay people off, new hires would be the first to go. “If we are letting go all junior employees,” noted Williams, “and the amount of those adds up to hundreds, that’s going to increase the percentage the county will pay.”

Within the next 10 years, about a quarter of the county’s 4,000 employees are expected to retire. Santa Barbara County is one of just three counties in California that pays the full normal cost of COLA (Cost-of-Living Adjustment) for its legacy employees ​— ​3,100 out of the 4,000. All other county governments pay just half.

If the county supervisors forced legacy employees to pick up more of the pension costs, the county would save $7.3 million, according to county CEO Mona Miyasato.

Such a change would be negotiated at the bargaining table. In the coming months, all 10 unions will reopen contract negotiations with county executives. Should they declare impasse, the county could unilaterally require legacy employees to pay more to their retirement benefits, cutting their take-home pay.

Coral Itzcalli, a spokesperson for SEIU (Service Employees International Union) 721, which represents 550 employees in the county, argued, “Shortchanging pensions is misguided and shortsighted.” She argued that without decent pay and solid pensions, the county would become a “training ground where workers get their experience for the first year or two of their careers and then take those skills to other municipalities or to private industry.”

To fix the problem, Williams said, “We’ve got to get into the little things.” Some think that could be pot revenue, and it might not be so little. Among county insiders, there is a dispute brewing about how lucrative marijuana tax revenues will eventually be. Optimists point to places like Humboldt County, which predicts to bring in $7.3 million annually, even though Humboldt is proposing one of the lowest tax rates in the state.

It remains to be seen how many acres on which the county supervisors will allow farmers to grow cannabis. Though there are 700,000 acres of agricultural land in Santa Barbara County, speculation is that politics will limit the area to about 1,000 acres. Asked if marijuana will save the day, Williams said, “We shouldn’t bank on it, but it’s a possibility.”


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