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Ventura County Sustainable Retirement System Pension Reform Initiative (November 2014)

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A Ventura County Pension Reform Initiative ballot question, called the Sustainable Retirement System Initiative, will likely be on the November 4, 2014 election ballot for voters in Ventura County, California.

The Committee for Pension Fairness, supported by the Ventura County Taxpayers Association, filed this initiative on January 16, 2014, and the petitioners planned to begin circulating signature petitions on February 6, 2014.[1] The supporters of this initiative propose it as a way to deal with the nearly $1 billion in unfunded liabilities - debt not backed up by assets - faced by the Ventura County pension system. In 2013, the county contributed $162 million to its pension fund, which is 260% more than the 2004 county cost of $45 million. The 2013 figure of $162 million amounted to 17% of the county's budget. The "Sustainable Retirement System Initiative," if approved, would change the pension plan of newly elected officials and newly hired employees from the current defined benefit plan to a 401 (k)-style, defined contribution plan. The initiative would guarantee county contributions to employee retirement funds, which would be under the control of the individual employee and entirely portable. The measure would not require any "matching" contribution from the workers, but would allow employee contributions as desired. The proposed plan would also limit pension-based salary increases for five years, seeking to reduce allegedly immoderate pension payouts. If approved, the new system would apply to all county employees hired on or after July 1, 2015.[2][3]

According to the Committee for Pension Fairness, four fifths of county retirees who receive pension payments of over $100,000 per year are getting a larger salary than the one they earned while actually working. The Committee says this is caused by pension spiking, the practice of including unused vacation time, sick pay and other saved benefits in the final salary figures used to determine the amount of a pension. The Ventura County Employees’ Retirement Plan was established in 1947 and gives benefit services to about 15,000 members.[2]

Text of measure

Preamble

The Preamble of the proposed "Sustainable Retirement System Initiative" reads as follows: VenturaInitiativePremble.png

Full text

The full text of the initiative is available here.

About the initiative

Seal of Ventura County.jpg

The "Sustainable Retirement System Initiative," if approved, would change the pension plan of newly elected officials and newly hired employees from the current defined benefit plan to a 401 (k)-style, defined contribution plan. The initiative would guarantee county contributions to employee retirement funds, which would be under the control of the individual employee and entirely portable. The county's contributions to employee retirement accounts would be limited to be no more than the following rates:[4]

  • 4% of employee compensation to non-public safety employees who are enrolled in Social Security
  • 11% of employee compensation to public safety employees not enrolled in Social Security
  • 5% of employee compensation to public safety employees who are enrolled in Social Security

The measure would not require any "matching" contribution from the workers, but would allow contributions from employees as desired. The proposed plan would also limit pension-based salary increases for five years, seeking to reduce immoderate pension payouts and the practice of pension spiking. If approved, the new system would apply to all county employees hired on or after July 1, 2015.[2]

The Committee for Pension Fairness provided the following list of "Key Requirements of the Pension Reform Initiative:"[5]

401(k)-Style Plans for New Hires

The initiative would establish a new affordable retirement program for new employees with contribution rates based on private sector benchmarks.

Guarantee Death and Disability Benefits for Public Safety Personnel, Including Sheriff Officers and Firefighters The initiative ensures any County employees who put their lives on the line to keep the public safe are protected with death and disability benefits for them and their families.

End Special Pensions for Politicians Under the Pension Reform Initiative, county politicians would receive the same basic benefit as other county government employees. Politicians would not be able to vote on their own pension benefits.

Caps Pensionable Pay for 5 Years The initiative will reform existing pension payouts to more sustainable and acceptable levels by capping for five years the amount used to calculate higher paid county employee’s pensionable compensation. This reform produces significant savings and reduces outrageous payout amounts in the pension system.

Background

Pension fund facts

  • The total amount of pension payments to County retirees has increased by 100% from $101 million in 2004 to $203 million in 2013.
  • In 2004, Ventura County contributed $45 million to its pension fund.
  • By 2013, the County’s contribution had swollen by 260% to $162 million.
  • $162 million, the amount the county had to contribute to the pension fund in 2013, amounted to 17% of the county's entire budget.
  • The Ventura County Chief Finance Officer estimated that the county's contributions would grow to over $220 million by 2018.
  • The pension fund that current retirees depend on for pension payments is 79% funded, while an auxiliary fund run by the county is only 65% funded.[6]

Notable county pensions

Supporters of the initiative point towards a couple allegedly immoderate and excessive pensions of retired county officials and the general trend of retired employees receiving pensions that are larger than their ending salaries as reasons that reform is needed in the county.[7]

"Ventura decision"

A 1997 state Supreme Court ruling in Ventura County allowed retirees to add special pay such as vacation time, bonuses, health care allowances, education allowances and car, uniform and equipment allowances to their "final salary" for use in calculating their final pension amount. This court case, called "the Ventura Decision," gives legal authority for this process, commonly called pension spiking, and, according to an analysis done by Los Angeles Times in 2012, the decision has allowed 84 percent of Ventura County retirees with pensions above $100,000 to retire with a pension that is greater than their salary while working ever was. Two such cases that are commonly pointed to by pension reform supporters to illustrate exorbitant pensions are below.[7]

Sheriff Bob Brooks

Ex-Ventura County Sheriff Bob Brooks retired in January of 2011 when his salary was $227,600. Once vacation pay, a substantial longevity bonus and other benefits were added, his pension payouts amounted to $283,000 per year. Moreover, in September of 2013, he filed a claim seeking to increase that pension salary by an additional $75,000 per year. James McDermott, an initiative supporter, said, “The fact that he spiked his pension beyond his base salary was a slap in the face to taxpayers. This is stabbing them in the back. What chutzpah.”[7]

An attorney for Brooks, Anthony Strauss, claimed that the former sheriff was counting on the extra benefits in his pension and based his retirement plans around such pension boosts, as he had been told repeatedly that they would be provided. Strauss also said, “He is an extremely generous man and travels on humanitarian missions all the time, to Haiti and other places. That’s the way he uses his funds.”[7]

Executive Marty Robinson

Former Ventura County Chief Executive Marty Robinson was earning $228,000 per year, when she retired in 2011, but now receives a pension salary of $272,000. According to the Los Angeles Times, “Robinson cashed out nearly $34,000 in unused vacation pay, an $11,000 bonus for having earned a graduate degree and more than $24,000 in extra pension benefits the county owed her." This extra pay boosted her the salary on which her pension was based to an amount that resulted in the pension of $272,000 per year.[7]

Support

Ventura Committee for Pension Fairness campaign image

Supporters

  • The Committee for Pension Fairness is sponsoring this initiative.
  • Ventura County Taxpayers Association
  • Ventura County Supervisor Peter Foy

Arguments in favor

Proponents argue that the current pension system is not sustainable and is bringing the county further and further into debt. This, they posit, is causing pension costs to skyrocket, which is taking funds away from important public services. They also argue that many pension payouts are exorbitant.[2]

David Grau of the Committee for Pension Fairness, concerning the rising pension costs of the county, said, “This impacts all residents of Ventura County. We’re trying to create a fair and sustainable system for everyone going forward instead of pushing the debt onto our grandchildren, our goal is to eliminate the $1-billion liability over time.”[2]

Ventura County Supervisor Peter Foy is an advocate for pension reform, and some unions in the county called for his removal from the county pension board because he supports the pension reform initiative. He said, regarding the arguments that the pension plan alterations will discourage quality public safety officers from working in the county, “That’s the argument everyone wants to make. I don’t believe that at all. Young deputies, especially, are more concerned about what you pay them. (The measure) is not saying you’re not going to get a pension. The pension is in a different format.” Foy also said that the pension system in place may be causing shortchanges to public safety, schools and libraries because of how much of the budget is taken up by county contributions to the pension fund. Foy said, “It’s getting very expensive. (The measure) is a tremendous step forward in getting financial control going forward for new employees. It’s the right thing to do.”[2]

Jim McDermott, of Ventura County Taxpayers Association, said, "People are so excited that finally somebody is going to do something about this problem. I'm pretty confident that we are going to follow in the success that we've seen in San Diego and San Jose. We're going to be successful without question."[8]

McDermott went on to criticize a common argument against the initiative, namely, that the county would be unable to competitively hire and retain quality employees. He said, "Well, that's just nonsense. Somehow the private sector throughout the country has attracted and retained great talent with the 401k-type system, so I have no doubt that we'll be able to attract and retain top quality talent. And there's nothing in our initiative that limits the board of supervisors' ability to raise compensation if that's necessary, but the value is that it would be transparent compensation."[8]

Supervisor Peter Foy

City unions have claimed that County Supervisor Peter Foy, who is a strong advocate of the pension reform initiative, should not be allowed on the county pension board while he supports the reform initiative. In response, the other County Supervisors delayed reappointing him to the board. Ultimately, however, they did not listen to the unions and reappointed Foy to the pension board.[9][10]

Opposition

Opponents

Most city unions oppose the initiative.

  • Ventura County Sheriff Geoff Dean
  • The Citizens for Retirement Security, a group of Ventura County employees and residents, was formed to opposed the initiative.[11]

Arguments against

Those who oppose the measure dismiss the claims that pension expenses are taking money away from county operations and services as unfounded and exaggerated. Moreover, they claim the pension plan changes would make it harder to competitively hire and retain public safety officer, lowering the quality of service in the county.[2]

Sheriff Geoff Dean is among these critics of the initiative and thinks the dangers of pension debt are being exaggerated. He said, “The county has done an outstanding job managing its budget. It has the highest bond rating possible." He went on to criticize the initiative itself, arguing that it would hurt public safety, rather than help it since the altered pension benefits would make the county less attractive to quality public service officers. He said, “It’ll certainly be detrimental to my ability to try to recruit and retain qualified people. It’s really not a good idea, especially in the area of public safety.”[2]

Union activist Rick Shimmel said, concerning the initiative, "I think it's ideologically driven by people who simply don't believe that there should be a pension system for public employees, period. We don't see the 401k as a pension plan. We see it as a savings vehicle to help people during their retirement years. 401ks carry no guarantee, and that's the distinction between a defined-contribution system and defined-benefit system."[8]

Path to the ballot

The Committee for Pension Fairness, supported by the Ventura County Taxpayers Association, filed this initiative on January 16, 2014, and planned to begin circulating signature petitions on February 6, 2014.[2] The petitioners need to collect 26,000 valid signatures by May 16, 2014 to qualify their initiative for the November 4, 2014, ballot.[1]

Protesters

On February 8, 2014, the Committee for Pension Fairness and other supporters of the Ventura County pension reform initiative were trying to collect signatures for their initiative but were met by opponents of the initiative protesting against the measure and trying to persuade voters against signing the petition. About 50 people opposed to the measure showed up with signs and loud voices at Home Depots in Simi Valley, Newbury Park and Camarillo, where initiative petitioners were attempting to collect signatures. These protesters, including Sheriff Geoff Dean, one of the most outspoken initiative opponents, called the petition misleading and draconian in an effort to dissuade potential signers.[12]

Reports and analyses

Reason Foundation Report

The Committee for Pension Fairness, which is behind the Ventura County initiative to overhaul the public pension system, commissioned a report on the fiscal impact of the initiative from Reason Foundation, a Los Angeles-based libertarian research organization. The report claimed that the initiative, if approved, would save county taxpayers $460 million over 15 years and eliminate the county's pension debt. David Grau, a spokesman for the committee, said, "It's a very strong argument for reform." He also announced that, while the measure is not officially on the ballot yet, the petitioners are on track to collect the required number of signatures by the May 16 deadline to put their initiative on the ballot.[13][14]

The full report can be read here.

Critics

Steve Bennett, chairman of the Ventura County Board of Supervisors, was skeptical of the report because it was commissioned by the committee behind the initiative and authored by initiative supporters. Speaking about Reason Foundation on March 27, 2014, he said, “They have a point of view. I wouldn’t call it unbiased or even extremely credible in many instances.” He also said that, while the foundation was perfectly justified in giving their opinion on the initiative, he was waiting for the official analysis of the financial impact of the initiative commissioned by the county from Segal Consulting. This report was set to be released and submitted to the county board of supervisors sometime in April.[13]

The Citizens for Retirement Security, a group of Ventura County employees and residents, opposed to the initiative, responded to the study saying, "Clearly, the proponents of this expensive initiative scheme are afraid of the facts from the independent review of their measure by the county, so they're trying to cook the books in advance."[11]

Similar measures

See also

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