1. New Sonoma’s Analysis of the County’s Pension Crisis
Full Report Posted on

2. Who We Are
Financial experts and citizens concerned about the governance and the finances of our county.
Our Core Group Includes:
Mendocino County Retirement Board Member
Sonoma County Retirement Board Member
Former owner of a private pension management firm
Certified Public Accountant

3. Our mission is to create a government that:
Is transparent and tells us the truth about its finances
Operates efficiently for the benefit of its citizens, as opposed to special interest groups
Is able to deliver the services we all depend upon for our quality of life
Does not pass on unfair financial burdens to our children and grandchildren

4. Information Sources SCERA’s Annual Actuarial Reports
SCERA’s Annual Financial Statements
Segal Cost Projections
County Board Resolutions
County salary and benefits data on Transparent California.com
County Ad Hoc Pension Report
County Pension Report Update

5. Current State of Pension Plan
Inequality – post increase employees are receiving pensions 40% higher that pre-increase employees who have lost their COLA
New hires in lower tier are required to pay 3% of salary towards a benefit they never received
It is unaffordable to taxpayers and does not provide retirement security to county employees and retirees
Without reform taxes will need to be increased dramatically and essential services will continue to be cut

6. Pension Plan in 1993
Plan was formed in 1945 so it took 50 years for the costs to grow to these amounts.
County’s pension cost was $8 million
Benefits earned (liability) totaled $354 million
Unfunded liability and pension bond debt was $79 million

7. Pension Plan 9 Years Later in 2002
Pension cost with debt service grew 460% from $8 million to $55.7 million
Liability owed to retirees grew 280% to from $354 million to $1 billion
Unfunded liability plus pension bond debt grew 260% from $79 million to $210 million

8. Pension Plan 12 Years Later in 2014
Pension cost with debt service grew another 163% from $55.7 million to $90.9 million
Liability owed to retirees grew another 250% from $1 billion to $2.5 billion
Unfunded liability and pension bond debt grew 457% from $210 million to $960 million

9. Pension Increases In 1998 SCERA made 45 Other Pay items pensionable
In 2002 the SCERA Board settled a lawsuit that changed formulas for Safety employees to 3% at 50 and General employees to 3% at 60. The settlement was agreed to by the SCERA board, not the BOS.
All increases were enacted without required public protections including the disclosure of the future annual cost at a noticed Board of Supervisors meeting.

10. Problem with Retroactive Benefit Increases
Retroactive increases allow employees to retire with an retirement account balance that is deficient because the employee and the employer were paying into a plan with a lower benefit formula during their career.
As a result, the pension system incurred huge unfunded liabilities as a result of the increases.

11. General Employee Benefit Formula
Age at
Old Pre
3% at 60
Increase
Retirement
over old
Formula 50
1.34
2.0
49.25% 51
1.41
2.1
48.94% 52
1.49
2.2
47.65% 53
1.58
2.3
45.57% 54
1.67
2.4
43.71% 55
1.77
2.5
41.24% 56
1.88
2.6
38.30% 57
2.7
35.00% 58
2.09
2.8
33.97% 59
2.21
2.9
31.22% 60
2.34
3.0
28.21% 61
2.47
21.46% 62
2.62
14.50%

12. Why Folks Average Retirement Ages Dropped
Years
Age
Formula
Final
Pay Deduction
Pre Retirement
Post Ret.
Amount
Percentage of
Salary
for Pension
Take Home Aft.
Income
Difference
Service
SSI & Medicare
Ret. Deductions 20 50
2.0
$85,000
20.00%
$68,000
$34,000
-$34,000
-50.00% 21 51
2.1
$37,485
-$30,515
-44.88% 22 52
2.2
$41,140
-$26,860
-39.50% 23 53
2.3
$44,965
-$23,035
-33.88% 24 54
2.4
$48,960
-$19,040
-28.00% 25 55
2.5
$53,125
-$14,875
-21.88% 26 56
2.6
$57,460
-$10,540
-15.50% 27 57
2.7
$61,965
-$6,035
-8.87% 28 58
2.8
$66,640
-$1,360
-2.00% 29 59
2.9
$71,485
$3,485
5.13% 30 60
3.0
$76,500
$8,500
12.50% 31 61
$79,050
$11,050
16.25% 32 62
$81,600
$13,600 33 63
$84,150
$16,150
23.75%

13. How Were The Increased Supposed to Be Paid For
According to Board Resolutions General Employees were required to pay 100% of the past (retroactive) and future cost of the increase with a 3% of salary increase in their contributions
Safety Employees were required to pay only the past cost of the increase, estimated to be 50% of the cost with a 3% of salary increase in their contributions

14. Additional Pension Amount Following Increase
Years
Age
Old
New
Final
Pension
Additional
% Diff
Difference of
Formula
Salary
Due to
Times 25
Service
Amount
Increase
Years of Ret 20 50
1.34
2.0
$85,000
$22,780
$34,000
$11,220
49.25%
$280,500 21 51
1.41
2.1
$25,169
$37,485
$12,317
48.94%
$307,913 22 52
1.49
2.2
$27,863
$41,140
$13,277
47.65%
$331,925 23 53
1.58
2.3
$30,889
$44,965
$14,076
45.57%
$351,900 24 54
1.67
2.4
$34,068
$48,960
$14,892
43.71%
$372,300 25 55
1.77
2.5
$37,613
$53,125
$15,513
41.24%
$387,813 26 56
1.88
2.6
$41,548
$57,460
$15,912
38.30%
$397,800 27 57
2.7
$45,900
$61,965
$16,065
35.00%
$401,625 28 58
2.09
2.8
$49,742
$66,640
$16,898
33.97%
$422,450 29 59
2.21
2.9
$54,477
$71,485
$17,009
31.22%
$425,213 30 60
2.34
3.0
$59,670
$76,500
$16,830
28.21%
$420,750 31 61
2.47
$65,085
$79,050
$13,966
21.46%
$349,138

15. 3% Contribution Based on an $85,000 Salary
Years
Amount
% of
Emp. Cont.
Contributed
Increase
to Increase
Paid For 1
$2,550
0.91% 2
$5,100
1.66% 3
$7,650
2.30% 4
$10,200
2.90% 5
$12,750
3.42% 6
$15,300
3.95% 7
$17,850
4.49% 8
$20,400
5.08% 9
$22,950
5.43% 10
$25,500
6.00% 11
6.06% 12
$28,050
8.03%

16. The Fatal Flaw in Their Approach
Since people can retire at anytime, there is no way for a 3% of salary increase in future contributions to pay for a retroactive increase.
Since the increase in 2004, 2,500 people have retired meaning they paid the additional contribution for an average of 5 years.
The only way for employee to pay for increase would be to write a check for future value of their benefit at retirement.

17. Text from 2011 Ad Hoc Report
Committee on Page 18 requested staff determine the actual cost of the increase because it was clear that the intent of the employees to pay for the increase was not being met.
Never done and could easily be done by SCERA who calculates pension amounts
January report regarding review of progress recommends waiting 10 years to perform this study. Which means most all employees who received increase will be retired.

26. Average Pensionable Salaries 2013
1 Santa Clara $87,136 2 Sonoma $86,067 3 Marin $85,872 4 San Francisco $85,299 5 Alameda $84,935 6 San Mateo $84,312 7 Ventura $79,172 8 Contra Costa $75,449 9 Orange $75, Santa Barbara $73, Sacramento $72, Los Angeles $70, San Joaquin $68, Kern $65, San Bernardino $65, San Diego $63, Merced $58, Stanislaus $55, Fresno $53, Imperial $53, Mendocino $52, Tulare $52,692 Average $70,450

27. Compensation Comparison
Employee Comp of 198 Highest Paid Employees
Sonoma
Marin
Napa
Solano
Mendo
Average of other 4
Ratio Avg. vs Sonoma
Average Base Salary
$114,192
$133,672
$120,498
$128,531
$70,914
$113,404
101%
Average Other Pay
$35,206
$11,673
$7,136
$11,685
$2,774
$8,317
423%
Other Pay as Percantage of Salary
30.83%
8.73%
5.92%
9.09%
3.91%
6.91%
446%
Average Benefits
$74,648
$53,816
$28,224
$46,001
$48,821
$44,216
169%
Average Total Compensation
$224,046
$199,161
$155,858
$186,217
$122,508
$165,936
135%

28. Comparison with Tulare County 2013
Tulare Sonoma Population 449, ,253 Active Employees 4,197 3,620 Average Salary $52,384 $86,067 Pension Bonds Sold $41 M $592 M County Contribution $30 M $69 M Bond Debt Service $0 $48 M Total Pension Costs $30 M $117 M Unfunded Liability $119 M $527 M Liability + bond debt $119 M $1 Billion

32. Derivation of Experience 2001 to 2013
Item
Amount
Percent
Comp. Increase Greater (Less) Than Expected
$ ,991,265
-5.92%
Active Withdrawl Loss
$ ,814,280
-1.09%
Deaths Greater (Less) than Expected
$ (22,651,705)
2.80%
Investment Experience
$ (508,891,075)
62.82%
Retirement Incidence - Earlier Than Assumed
$ (142,835,697)
17.63%
Withdrawl Incidence More Employees Leaving
$ ,781,630
-0.22%
Disability Incidence More Leaving Due to Dis.
$ (1,672,877)
0.21%
Contribution Timing - Delay in Paying New Rates
$ (3,336,704)
0.41%
Other Expericence
$ (51,123,180)
6.31%
Service Crediting Loss
$ (1,904,220)
0.24%
Inclusion of Cash Allowance as Pensionable
$ (71,099,000)
8.78%
Granting Early Retirement Option Benefit
$ (1,448,000)
0.18%
Other Expericence Gain
$ ,031,000
-0.74%
Eliminate Employee Defered Comp. Cost
$ ,403,000
-1.41%
Assumption Changes
$ (81,147,000)
10.02%
Total
$ (810,088,283)
Average
$ (62,314,483)

33. Pension Cost Projections
Assuming 7.5%, 6.5%, 5.5% and 4.5% Discount Rate
These spreadsheets use Segal’s smoothed investment returns versus the other Segal calculation that grabbed 2013’s 19% investment returns.
That is the version Chris Thomas used the Pension Reform Update Report to sell the Supervisors on the idea that no additional reforms are necessary.

34. Pension Costs at 7.5% $440,376 $43,369 10.17% $96,527 $139,896 22.04%
Year
Total Compensation Per Chris Thomas Table (assumes 4% growth)
Payroll Per Chris Thomas Table (assumes 4% annual growth)
POB Debt Service Costs (Per Chris Thomas Table)
POB debt as a % of Payroll
Employer Pension Contribution
Employer Cost per Year with Debt Service
Segal Projected Employer Contribution as % of Payroll per April 29, 2014 letter to Julie Wyne (known amount)
Employer Contribution as Percentage of Payroll at 7.5% Rate
Total Employer Contribution with POB Debt Service as a % of Total Comp
2013
$506,950
$329,893
$ 37,175
11.27%
$79,174
$116,349
24.00%
35.27%
22.95%
2014
$550,840
$343,089
$39,120
11.40%
$81,312
$120,432
23.70%
35.10%
21.86%
2015
$572,874
$356,812
$42,225
11.83%
$83,851
$126,076
23.50%
35.33%
22.01%
2016
$595,789
$371,085
$44,146
11.90%
$84,607
$128,753
22.80%
34.70%
21.61%
2017
$619,620
$385,928
$46,353
12.01%
$86,448
$132,801
22.40%
34.41%
21.43%
2018
$644,405
$401,365
$48,449
12.07%
$88,702
$137,151
22.10%
34.17%
21.28%
2019
$670,181
$417,420
$50,355
12.06%
$90,998
$141,353
21.80%
33.86%
21.09%
2020
$696,988
$434,117
$52,361
$92,901
$145,262
21.40%
33.46%
20.84%
2021
$724,868
$451,481
$54,470
$95,263
$149,733
21.10%
33.16%
20.66%
2022
$753,863
$469,541
$56,392
$97,195
$153,587
20.70%
32.71%
20.37%
2023
$784,017
$488,322
$32,729
6.70%
$99,618
$132,347
20.40%
27.10%
16.88%
2024
$815,378
$507,855
$34,250
6.74%
$102,079
$136,329
20.10%
26.84%
16.72%
2025
$847,993
$528,169
$35,830
6.78%
$119,894
$155,724
22.70%
29.48%
18.36%
2026
$881,913
$549,296
$37,481
6.82%
$123,042
$160,523
29.22%
18.20%
2027
$917,189
$571,268
$39,201
6.86%
$122,823
$162,024
21.50%
28.36%
17.67%
Average
$440,376
$43,369
10.17%
$96,527
$139,896
22.04%
32.21%
20.13%

35. Pension Costs at 6.5% 2013 $506,950 $329,893 $37,175 $89,467 $126,642
Year
Total Compensation Per Chris Thomas Table (assumes 4% growth)
Payroll Per Chris Thomas Table (assumes 4% annual growth)
POB Debt Service Costs Per Chris Thomas Table)
Employer Contribution Using 6.5% adds 13% to the 7.5% rate
Employer Cost with Debt Service
Employer Contribution as Percentage of Payroll at 6.5% Rate
Employer Cost as a Percentage of Total Compensation
2013
$506,950
$329,893
$37,175
$89,467
$126,642
38.39%
24.98%
2014
$550,840
$343,089
$39,120
$91,883
$131,003
38.18%
23.78%
2015
$572,874
$356,812
$42,225
$94,751
$136,976
23.91%
2016
$595,789
$371,085
$44,146
$95,606
$139,752
37.66%
23.46%
2017
$619,620
$385,928
$46,353
$97,686
$144,039
37.32%
23.25%
2018
$644,405
$401,365
$48,449
$100,233
$148,682
37.04%
23.07%
2019
$670,181
$417,420
$50,355
$102,827
$153,182
36.70%
22.86%
2020
$696,988
$434,117
$52,361
$104,978
$157,339
36.24%
22.57%
2021
$724,868
$451,481
$54,470
$107,647
$162,117
35.91%
22.37%
2022
$753,863
$469,541
$56,392
$109,830
$166,222
35.40%
22.05%
2023
$784,017
$488,322
$32,729
$112,568
$145,297
29.75%
18.53%
2024
$815,378
$507,855
$34,250
$115,349
$149,599
29.46%
18.35%
2025
$847,993
$528,169
$35,830
$135,481
$171,311
32.43%
20.20%
2026
$881,913
$549,296
$37,481
$139,038
$176,519
32.14%
20.02%
2027
$917,189
$571,268
$39,201
$138,790
$177,991
31.16%
19.41%
Average
$440,376
$43,369
$109,076
$152,445
35.08%
21.92%

36. Pension Costs at 5.5% $440,376 $43,369 $123,555 $ 166,924 38.38%
Year
Total Compensation Per Chris Thomas Table (assumes 4% growth)
Payroll Per Chris Thomas Table (assumes 4% annual growth)
POB Debt Service Costs Per Chris Thomas Table)
Employer Contribution Using 5.5% adds 28% to the 7.5% Rate
Employer Contribution with Debt Service
Employer Contribution as Percentage of Payroll at 5.5% Discount Rate
Employer Cost as a Percentage of Total Compensation
2013
$506,950
$329,893
$ ,175
$101,343
$138,518
41.99%
27.32%
2014
$550,840
$343,089
$ ,120
$104,079
$143,199
41.74%
26.00%
2015
$572,874
$356,812
$ ,225
$107,329
$149,554
41.91%
26.11%
2016
$595,789
$371,085
$ ,146
$108,297
$152,443
41.08%
25.59%
2017
$619,620
$385,928
$ ,353
$110,653
$157,006
40.68%
25.34%
2018
$644,405
$401,365
$ ,449
$113,538
$161,987
40.36%
25.14%
2019
$670,181
$417,420
$ ,355
$116,477
$166,832
39.97%
24.89%
2020
$696,988
$434,117
$ ,361
$118,913
$171,274
39.45%
24.57%
2021
$724,868
$451,481
$ ,470
$121,936
$176,406
39.07%
24.34%
2022
$753,863
$469,541
$ ,392
$124,409
$180,801
38.51%
23.98%
2023
$784,017
$488,322
$ ,729
$127,511
$160,240
32.81%
20.44%
2024
$815,378
$507,855
$ ,250
$130,661
$164,911
32.47%
20.23%
2025
$847,993
$528,169
$ ,830
$153,465
$189,295
35.84%
22.32%
2026
$881,913
$549,296
$ ,481
$157,494
$194,975
35.50%
22.11%
2027
$917,189
$571,268
$ ,201
$157,213
$196,414
34.38%
21.41%
Average
$440,376
$43,369
$123,555
$ ,924
38.38%
23.99%

37. Pension Costs at 4.5% $440,376 $43,369 $138,999 $182,368 41.91% 26.19%
Year
Total Compensation Per Chris Thomas Table (assumes 4% growth)
Payroll Per Chris Thomas Table (assumes 4% annual growth)
POB Debt Service Costs Per Chris Thomas Table)
Employer Contribution Using 4.5% adds 44% to the 7.5% Rate
Employer Contribution with Debt Service
Employer Contribution as Percentage of Payroll at 5.5% Return
Employer Cost as a Percentage of Total Compensation
2013
$506,950
$329,893
$37,175
$114,011
$151,186
45.83%
29.82%
2014
$550,840
$343,089
$39,120
$117,089
$156,209
45.53%
28.36%
2015
$572,874
$356,812
$42,225
$120,745
$162,970
45.67%
28.45%
2016
$595,789
$371,085
$44,146
$121,835
$165,981
44.73%
27.86%
2017
$619,620
$385,928
$46,353
$124,485
$170,838
44.27%
27.57%
2018
$644,405
$401,365
$48,449
$127,730
$176,179
43.90%
27.34%
2019
$670,181
$417,420
$50,355
$131,036
$181,391
43.46%
27.07%
2020
$696,988
$434,117
$52,361
$133,777
$186,138
42.88%
26.71%
2021
$724,868
$451,481
$54,470
$137,178
$191,648
42.45%
26.44%
2022
$753,863
$469,541
$56,392
$139,961
$196,353
41.82%
26.05%
2023
$784,017
$488,322
$32,729
$143,450
36.08%
22.47%
2024
$815,378
$507,855
$34,250
$146,994
$181,244
35.69%
22.23%
2025
$847,993
$528,169
$35,830
$172,648
$208,478
39.47%
24.58%
2026
$881,913
$549,296
$37,481
$177,181
$214,662
39.08%
24.34%
2027
$917,189
$571,268
$39,201
$176,865
$216,066
37.82%
23.56%
Average
$440,376
$43,369
$138,999
$182,368
41.91%
26.19%

38. Reform Savings
New tier for defined benefits $92 million
Eliminate spiking $41.3 million
Shared risk $44.7 million
have new tiered employees pay 3% additional contribution and not pick up any of employee contributions
Total Savings $179 million

39. Who is Responsible for Savings
All the changes and savings on the previous slide were forced upon the County according to an independent study by the Citizens for Sustainable Pension Plans organization in Marin County.
As the report points out these changes, new tiers and reduced spiking could have been adopted by the Board of Supervisors years ago.

40. Recommendations
Follow Rhode Island Reform Model – present it as a math problem. Make your report a call to action.
Hire attorney or a retired judge to review the County’s violations of the notification rules and enactment of the increase using a lawsuit settlement and recommend legal remedies.
Hire an independent attorney to determine if California Rule applies to Sonoma County.
Hire an impartial retired judge to review legal issues and propose remedies
Interview former Supervisors to understand what was presented to them.
Put all reform options on the table and hire an actuary to calculate the savings of each option so Supervisors can make informed decisions.
Help employees and unions understand take home pay can be increased if benefits formulas are lowered.
Reduce unfunded liability and create equality. In RI retirees took benefit cut. Trade it for mandatory COLA.
Recommend self correcting triggers that apply if pension funding levels drop.

41. Time Sensitive Priority
I recommend you issue your initial report soon listing the issues that you intend to investigate and ask the Board of Supervisors to delay any new contracts until your final report in June so if a judge looks at the violations and agreements and renders remedies the county won’t need to wait another 3 years for that the remedies to be implemented.
Three supervisors are up for reelection next year so not following your advice to delay contracts might become a difficult election issue for them. Let’s remember their job is to represent the people’s interest, not the employees or the unions and I have been warning them about the illegalities for years. And the Press Democrat could make this a big issue.