The Board of Supervisors on Tuesday heard for the first time from an advisory commission created to offer solutions to make the public pension system solvent.

Critics of the current structure have warned that growing obligations put county programs and services at risk. Interest earnings on pensions have dropped from 8.16% to 7.75%, mainly because of the stock market freefall in 2008.

Financially strapped Santa Barbara County will pay an estimated $105 million into the retirement fund in the coming fiscal year, with $40 million for 942 safety employees and $65 million for 3,074 general employees.

Last March, county supervisors put together the five-member commission to come up with cost-cutting alternatives to the current pension system.

The report presented Tuesday offers a wide range of changes, including a reduction in the formulas used to calculate the pension benefit; eliminating the use of one year of final average salary to calculate the pension benefit; eliminating employer contributions to the employee’s contribution toward the pension benefit; starting a 2% post-retirement cost-of-living adjustment, instead of the current 3%; removing the vacation conversion that allows employees to convert vacation hours to cash, and scrubbing all performance-based lump-sum payments, which increase final average salary.

In all, the county could save as much as $31 million. Second District Supervisor Janet Wolf cautioned that some of the proposals raise legal concerns. She noted that only three options, which would only save the county $5.5 million, can be implemented outside of bargaining with labor unions.

“These are somewhat complex policy decisions for the county,” noted county actuary Bill Hallmark. The board, he explained, will have to sit down with labor groups to decide what benefits it will offer, the retirement age and the percentage they can draw. He said the proposals to the plans would impact new employees and that savings wouldn’t be realized for years. “In the short run, the impact is not huge.”

One alternative that would reap the most in savings would have general workers receiving 80 percent of their incomes – comprised of the county’s and the employee’s contribution and Social Security – at age 65. This option would require a defined contribution element in which 2.5 percent of worker salaries would go toward the plans.

During public comment, several people thanked the board for tackling the thorny issue of pension reform. Goleta Mayor Margaret Connell said her city, which contracts for police services with the county Sheriff’s Department, will see a 20% increase in pension-related costs unless the system is changed.

She noted that the city has let two deputies go in the past two years and has already discussed looking elsewhere for law enforcement or reducing service levels. “They’re undesirable outcomes either way,” she said. “It’s not something we want to do.”

David Stockdale, an employee benefits consultant for local small businesses, didn’t mince words describing how he felt about the current pension structure.

“I just want to inject a little bit of realism to this as you rearrange the deck chairs on a sinking ship,” he said. “We have one big, fat bloated system for public employees.

“What we have (in the private sector) is a system where we have social security, maybe a small contribution from our employer, and then we need to be personally responsible for preparing for our own retirement. That’s the American way. I’d like the public employees to understand that that’s what sustainable.”

Darryl Scheck, a member of the county Employees’ Retirement System, implored the board to “keep an open mind about all ideas regarding the current retirement system” and to use discretion with what changes in benefits to give future employees. He also took aim at “people who claim to be experts in the field of defined pension plans,” saying the average general member retiree has an annual pension of less than $25,000 and not $100,000, as some contend.

“Not exactly the poster children of pension abuses that the media seems to focus on like the city of Bell,” he said.

First District Supervisor Salud Carbajal echoed his sentiment by alluding to Stockdale’s comments.

“I think it’s important to give a perspective, because there are some speakers who come up here and clearly they have been on the Titanic, have sunk, and have come back in a second life, because their distortions are just out of this world,” he said. “I think that good information will do us all good.”

Supervisors met in a closed session to discuss pension expenses because they involve salary negotiations. The board will take up the issue for further discussion, though no date has been set. “We need to engage in serious discussions to the point where we can come up with a win-win to create a sustainable pension system,” Carbajal said, “and to continue to provide a reasonable level of service to the public in future years.

jfoster@syvjournal.com