Rising pension costs strain countyBy Michelle Durand
San Mateo County's unfunded pension liability - namely retirement benefits draining current coffers to pay for past employees - is $9,415 per household, according to a recent national study looking at local governments at risk for bankruptcy.
San Mateo was listed among the top 10 counties nationwide troubled by rising pension costs as ranked in an Oct. 13 study out of Northwestern University's Kellogg School of Management. Other Bay Area counties include Sonoma and Contra Costa.
The study found San Mateo County has $2.5 billion in unfunded liability, which pencils out to $9,415 per household. The liability is 413 percent of revenue based on June 2006 data, according to the study which predicts the county would run out of assets to pay benefits in 2024.
The run-outs were calculated assuming an 8 percent return and other factors such as workers retiring early, using future contributions to fund the benefits of existing workers and how well funded a pension plan is.
For example, the city of San Francisco has the third largest unfunded liability per household but will not run out until 2032 because its plan members are relatively young and its current pension payouts are low, according to the study.
County officials have long warned of swelling retirement benefits overtaking budgets and cutting into other vital programs and services. However, local officials say the study implies the county will eventually be forced to stop paying benefits.
The solvency horizon used in the study assumes the county would stop investing in its pension program which is "clearly not the case," said county spokesman Marshall Wilson.
The county invests approximately $150 million annually to fund its pension obligations.
County finance officials were not immediately available for comment on the study but Wilson said they explained that San Mateo County has never issued a pension obligation bond which makes the unfunded figure appear so much larger, Wilson said.
Other jurisdictions issue the bonds to provide immediate money for pensions and lower obligations.
"But in the long run, pensions cost those government agencies and taxpayers more because the agencies must also pay back the bonds with interest," Wilson said.
Instead, he said the San Mateo County Employees' Retirement System and county brass take "a long-term approach" to pension financing.
The study, "The Crisis in Local Government Pensions in the United States," calculated the present value of local pension liabilities as of June 2009 for approximately two-thirds of local government employees. All together, the total unfunded liability is $190 billion, or more than $7,000 per municipal household.
Copyright ©2010 San Mateo Daily Journal. Published 10/27/2010.