For Immediate Release
March 15, 2016
California Policy Center
Contact: Will Swaim
SACRAMENTO — Years after the Great Recession slammed their Wall Street investments, at least four California counties have broken through the 10 percent ceiling, spending one of out of every $10 to fund their government-employee retirement programs.
The resulting strain on local budgets, called the pension burden, is one of the revelations in California Policy Center’s latest analysis of county reports.
Study author Marc Joffe said county pension burdens may be worse than his analysis reveals.
“Because pension systems usually require their actuaries to assume high rates of return on their assets, it’s arguable that counties understate their actual pension burdens,” Joffe said. “The financial stress on local governments is likely more critical than even our numbers reveal.”
Four California counties reported their pension contributions now exceed 10 percent of total revenues: Santa Barbara County (13.1 percent), Kern County (11 percent), Fresno County (10.7 percent) and San Mateo County (10 percent).
A fifth county, Merced, is also expected to report that its required contributions topped 10 percent of 2015 revenue when it files its audit.
“For years, public employee union leaders denied the pension burden was even close to 10 percent,” California Policy Center president Ed Ring noted. “This study shows the burden in some places is now approaching 15 percent of total revenues.”
The surveyed counties, which account for more than 95 percent of California’s population, made over $5.4 billion in pension contributions during the fiscal year. These counties also made $660 million of debt service payments on pension obligation bonds, raising total pension costs to over $6 billion last year.
That figure accounts for about one sixth of all California state and local pension contributions (not including payments on pension obligation bonds), estimated at $30.1 billion in 2014.
As investment markets remain relatively flat, it seems likely that many California counties will bow to pressure to cut government services or to raise cash through debt instruments or taxes.
The complete California Policy Center study is available here.
ABOUT THE AUTHOR
Study author Marc Joffe is the founder of Public Sector Credit Solutions and a policy analyst with the California Policy Center. Joffe founded Public Sector Credit Solutions in 2011 to educate policymakers, investors and citizens about government credit risk. PSCS research has been published by the California State Treasurer’s Office, the Mercatus Center and the Macdonald-Laurier Institute among others. Before starting PSCS, Marc was a senior director at Moody’s Analytics. He earned his MBA from New York University and his MPA from San Francisco State University.
ABOUT THE CALIFORNIA POLICY CENTER
The California Policy Center is a non-partisan public policy think tank providing information that elevates the public dialogue on vital issues facing Californians, with the goal of helping to foster constructive progress towards more equitable and sustainable management of California’s public institutions. Learn more at CaliforniaPolicyCenter.org.