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O.C. Workers Win on Pensions

Supervisors' 3-2 vote lets employees sacrifice now to gain later. But some see a fiscal danger.

August 25, 2004|Stuart Pfeifer | Times Staff Writer

A divided Orange County Board of Supervisors approved new union contracts Tuesday that will allow many county workers to retire earlier and with bigger pensions -- a benefit that employees say will cost taxpayers nothing.

The deals affect nearly 15,000 county employees, such as librarians and social workers, who agreed to forgo pay raises for two years, pay more for medical benefits and increase their contributions to the retirement system in exchange for better pensions.

The board's 3-2 vote followed a spirited debate and came in spite of a caution from the county's treasurer, John M.W. Moorlach, who said the pension increase exposed the county to unnecessary risk just 10 years after a devastating bankruptcy.

Under the new plan, employees become eligible for maximum benefits -- up to 100% of their final salaries for life, depending on years of service -- starting as early as age 55. Union officials estimate that 800 employees -- about 5% of the county workforce -- will retire as soon as the benefits take effect, in July.

Supervisors Tom Wilson, Jim Silva and Bill Campbell supported the new contracts, citing analyses by county financial officers and an independent actuary who said the employee concessions will cover the expenses. Supervisors Chris Norby and Chuck Smith opposed the deal, saying they feared the county would eventually be forced to pay for the new benefits.

Pension checks also will increase for the board members who voted Tuesday -- except for Smith, who leaves office in January, before the change takes effect. The supervisors agreed to pay about 7.5% of their $115,065 salaries into the retirement system to cover the increased expenses.

Some 300 county workers filled the board meeting room and an overflow area during the meeting and burst into a 10-second standing ovation after the vote, which affects four labor unions and workers from virtually every county department.

"We're extremely happy. This is going to be a great benefit for the county and a great benefit for our members," said Nick Berardino, general manager of the Orange County Employees Assn., which represents most of the affected workers.

Campbell said he agreed to approve the pension system increase only after representatives of each union said during the meeting that their members intended to pay for the increased benefits with no costs to the county. Under the contracts, employees will make additional payments of at least 2% of their salaries into the retirement system to help cover the costs.

That employee contribution would drop after 30 years -- the length of time needed to pay off the estimated $300 million it will cost to provide the enhanced pension benefit to current employees.

"The county employees recognized the county doesn't have extra money, so they were willing to forgo any pay increases. They felt their pension plans were substandard compared to other local governments, so they took the burden on their own shoulders to save enough to improve them," Campbell said. "I'd have a hard time saying, 'Oh, no. I don't want you to save that much.' "

Moorlach's concern was that the employees' contributions into the retirement system are based on the assumption that the system's investments earn an average of 7.5% over the next 30 years. If the system fails to meet that goal, he fears, the county could be on the hook for millions.

Norby said he was also concerned that the agreements call for younger workers to make additional payments into the retirement system while those who retire immediately get the same benefits without any additional expense.

He also suggested that the potential loss of hundreds of employees retiring early could be a burden on the county. Given increasing life expectancies, 55 is simply too early for employees to retire, Norby said.

"I value you so much, I'd like to see you work a few years longer and not just push you out the door," Norby said.

Norby also said he was uncomfortable with the fact that county and union officials divided the $300-million cost of the pension boost for current employees over a 30-year period, yet the labor contract is for only three years.

"This is a 30-year commitment on behalf of the county and only a three-year commitment on the part of various associations.... The guarantee this is not going to cost the county money, that is simply not true."

Representatives from a fifth union -- the American Federation of State, County and Municipal Employees, representing about 1,000 workers -- have not agreed to a new labor contract.

"We're still in negotiations with them," said Diane Thomas-Plunk, a county spokeswoman.

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