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Santa Maria Sun / News

The following article was posted on January 4th, 2017, in the Santa Maria Sun - Volume 17, Issue 44 [ Submit a Story ]
The following articles were printed from Santa Maria Sun [santamariasun.com] - Volume 17, Issue 44

Santa Barbara County budget faces surprise problems in new year

By BRENNA SWANSTON

For most of us, the new year means a clean slate—but for the county budget, not so much. The county’s looking at a rough fiscal year ahead, mostly thanks to an unexpected spike in pension costs for 2017-18.

In October, the county Board of Retirement approved a decrease in the assumed rate of return on government employee pensions, from 7.5 percent to 7 percent. To make up for the projected loss in returns, the county will have to shell out $12.2 million more in pension contributions than originally anticipated. A fiscal outlook report from December predicted the increase in county pension contributions would reach $46.1 million in five years.

The county budget will take hits from other angles, as well. Staff predicted in the fiscal outlook report a 3 percent increase in county employee compensation—more than the previously projected 2 percent increase—and the North County jail branch piles on another $9.1 million.

The county’s affected departments include Behavioral Wellness, Social Services, and Child Support Services. They now face an ultimatum: Look beyond the county for supplementary funding, or cut services.

The Board of Supervisors discussed potential approaches to these fiscal challenges at its Dec. 13 meeting. Fifth District Supervisor Steve Lavagnino suggested that the budgeting process more specifically lay out where county spending is mandatory and where it’s not.

“I think we’re in a new world of having to do some things that we’re probably not too comfortable with,” Lavagnino said at the meeting. “I think we’re spending some money on some things that I just thought we had to, because we’ve always done it. But it’s just been that that’s the way we’ve done things.”

The county will also adjust its hiring review process, reverting to the one it implemented nearly a decade ago during the Great Recession. A letter to the Board of Supervisors from County Executive Officer Mona Miyasato explained the new process, adopted by the board at the end of its meeting.

Miyasato wrote that when the hiring review process was used during the recession, the county Executive and Human Resources offices reviewed each request to fill a vacant position before moving forward with recruitment.

“This created departmental and executive review of each position being filled and was important to meet department balancing goals so that positions weren’t filled and then subsequently laid off,” she wrote. “This does not mean positions will not be filled; it does mean, however, that departments will need to justify filling positions, in the context of their operational necessity and ability to balance their budgets next year.”

The scaled-back hiring process and potential department cuts all trace back to the pension system, which Andy Caldwell—executive director of the Coalition of Labor, Agriculture, and Business—said is flawed on a statewide level.

Caldwell described two types of pension plans: defined contribution plans and defined benefits plans. Most private pension plans are defined contribution, meaning the employee and employer contribute a defined amount to the plan each month, and at the time of retirement, the amount of money an employee gets back depends on how well the investment performed.

But that’s not how public pensions work in California. Those are defined benefits, meaning the employee is guaranteed a defined amount of money at the end of retirement, so the employer must contribute whatever is necessary to ensure the investment returns that guaranteed amount.

“No matter what, if the stock market goes through the roof or completely tanks, you’re guaranteed to get a fixed amount,” Caldwell told the Sun. 

That’s why when the Board of Retirement changed its predicted rate of return on employee pensions, the county got stuck with the obligation to contribute more money. Caldwell said that unless California changes its pension laws, the system will perpetuate and worsen local government debts.

Caldwell said the only solution from the county is to lobby the state to change the law requiring that public pensions be defined benefits and allow them to “go to some hybrid form of pension for government employees.”

“Don’t cry on my shoulder until you’ve tried to get the state to change the law,” he said. “This pension system is not sustainable. They should be privatizing right now.”

If they don’t, Caldwell said, the county will end up with employees that cost so much, their departments won’t be able to provide adequate services—for example, jails allocate so much of their budget to employ guards, they can’t afford their inmates.

“They’ll be able to hire a street crew, but they won’t be able to afford the equipment to do the work,” he said. “This puts pressure on them to raise taxes, raise fees, and cut services.”

Miyasato’s letter to the board confirmed Caldwell’s point.

“General Fund departments will require additional funding, and absent that, propose service level reductions,” she wrote. “These may be severe in some departments.” 

Staff Writer Brenna Swanston can be reached at bswanston@santamariasun.com.




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