Blog Post < Previous | Next >
Marin County
Marin County wage hikes would add $1.8 million to county's expenses
It's good to see pension issues back in the Marin IJ! But Paul Premo actually said a great deal more before the Marin Board of Supervisors. Below is his statement to the Board of Supervisors.
Good Morning. Paul Premo, Mill Valley. Member of Core Group of Citizens for Sustainable Pension Plans. Here to address agenda items under Consent Agenda CA5 (wage increases).
These include three tentative labor compensation agreements that have wage increases. We appreciate the County providing this meeting for comments on the tentative agreements, before deciding to approve them at next week’s Board meeting.
In the brief time since those were available to the public, we have looked in particular at the Agreement with the Marin County Firefighters Association, representing 79 Full Time equivalents. Our concern is that the cost of this agreement---as well as for the others in the Agenda item---is understated---substantially. It fails to disclose the significant additional pension cost for such salary increases.
I have calculated the impact on pension funding requirements attributable to the Firefighter Association’s Agreement’s nearly $800,000 wage increase. That incremental pension cost would require about $2 - $2.5 million to be invested today and earn 7.25%/year compounded, to accumulate to pay for the increased pensions.
The annual pensions would be paid for retirees at age 55 on a formula of 3% per year of service times final 3-years’ average pay. The pensions would be paid to a retiree on average for 20 or so years. It is significant. It is not disclosed.
I note that If the funds administered by MCERA to grow and cover County employees’ retirement pensions instead only earn 6.25% per year, the funds required today to pay for those incremental pensions attributable to the salary increases would be about $3.5 - $4.5 million.
These calculations use the approach followed by MCERA’s Actuary. I have reflected the increased pension contributions that the employees will make, including the phase-out of the County’s payment of the 3% portion of the employees’ contribution requirement.
This undisclosed pension cost liability increase ultimately can only be met by increased contributions of taxpayer moneys to MCERA which means either more taxes, or reduced services, or more County debt.
I recommend that the County include such a costly element of CBA salary increases in its report of their costs. The HR Department personnel who do the negotiating should have the expertise to do such calculations and reflect them in their negotiations. I urge that this be done for all future CBA negotiations.
There is considerable doubt that MCERA’s assets can and will earn at least 7.25% compounded annually. MCERA’s economic consultant, Callan Associates, even concludes that this is highly unlikely for at least the next ten years. That is why we have done the calculations at both 7.25% and a more likely 6.25%.
Thank you.
Paul Premo for Citizens for Sustainable Pension Plans; July 12, 2016