After paying generous bonuses to retirees in recent years, Ventura County must now pay at least $5.5 million more into its employee pension system next fiscal year to offset poor investment returns.
In order to meet its future pension obligations, the county needs to boost its annual contribution to the retirement system 21%, from $26 million now to $31.5 million, officials said Wednesday.
"These are difficult times for the county anyway, and this, of course, exacerbates it," said county Treasurer and Tax Collector Harold Pittman, who oversees the retirement system. "Everybody wants to share when you have a surplus year.
"But if you have a year where you go in the hole, no one wants to pay for that," he added. "Who gets left holding the bag? The county."
Pittman said the extra $5.5 million will probably now be needed to balance pension contributions with future demands. The added pension costs will draw down the county's General Fund, which pays for a variety of basic services.
The $5.5 million will increase to $43 million the amount that must be cut to balance the county budget for the fiscal year beginning July 1. The total county budget this year is $860 million.
The need for the cash infusion drew immediate criticism from newly elected Supervisor Frank Schillo, a financial consultant who specializes in retirement funds. He said the county should never have paid retirees bonuses--which peaked at nearly $5 million in 1993--because there was no guarantee that the high returns of recent years would last.
The county should have saved the surpluses to avoid high General Fund contributions in the future, he said. Instead, the retirees came to rely on the extra payments.
"It just doesn't make any sense because at some point you have to take it back," he said.
But Pittman said the decision to distribute the money was made under a conservative strategy and after some reserves had been set aside.
"People forget that hindsight is 20-20," he said. "And when you're there in the trenches making the decisions year by year, it's different than looking back over multiple years at what you've done."
Former Supervisor Maria VanderKolk, who served on the retirement board for 1 1/2 years, said the fund was well-managed, but suffered recently from the economy.
"The market just hasn't performed well," she said.
The nine-member retirement board, which oversees the fund, is expected to approve on Monday a recommendation that the county make the extra $5.5 million payment. The issue would then go to the Board of Supervisors for approval.
"Obviously, it hurts us," County Auditor Thomas Mahon said. "But the retirement system has been well-managed in the past. They have had very good earnings."
Stocks and bonds make up most of the retirement system's $900-million portfolio. The fund also owns a small amount of real estate.
Throughout most of the 1980s, the portfolio earned double-digit returns, sometimes as high as 18%, Pittman said.
But in 1992, the market value for stocks and bonds soured and the county's earnings fell to 9%. In 1993, they plunged to 3%.
Another factor that contributed to the shortfall was a lower than expected turnover rate among new county employees. Employees who leave with less than five years of service lose the county contributions to their retirement.
"Ventura County wasn't the Lone Ranger," said Rick Roeder, whose firm serves as the county's actuary. "They were just tough economic years overall for retirement funds."
And while the $5.5 million is the steepest increase to the pension fund in recent history, Roeder said the county now pays a smaller percentage of its payroll into the retirement system than it did 15 years ago.
"I'm not saying it's not painful," he said, " but from the standpoint of a $900-million fund, it's not huge."
The county began paying bonuses to retirees in 1977. By 1994, 2,100 people were receiving supplemental payments that ranged from $35 to $70 a month, depending on length of service.
In 1983 and 1990, two other bonus plans were created that paid some retirees an additional $10.50 to $210 a month.
Between 1990 and 1994--when the programs were abolished--county retirees received $20.4 million beyond their guaranteed pensions.
When county officials moved to cut the extra pay last May, retirees argued that they deserved the money and counted on it for living expenses.