El Dorado County case study in pension mismanagement

Fiscal mismanagement has pushed many city and county governments close to insolvency: El Dorado County's experience shines a light on how it happens and how governments take the first steps down the slippery slope of bankruptcy, Village Life has the lowdown.

[El Dorado county auditor Joe Harn reports that] CalPERS investment earnings were lower than projected and accordingly our unfunded obligation increased by $14 million since our last CalPERS actuarial report.

"Further, in 2019 CalPERS changed its funding policy to require counties to pay down their unfunded obligation from 30 years to 20 years,” continued Harn. “This will require the county to make dramatically higher payments to CalPERS effective in 2021. Balancing the county’s budget and providing critical public safety and road maintenance services will become much tougher in the future because of our unfunded obligation to CalPERS.”

“CalPERS gave the county ridiculously low cost estimates in 1999. CalPERS projected the retroactive application of dramatically enhanced retirement benefits would not increase the cost to the county for the next 11 years,” the auditor said.

Ignoring the advice of the auditor-controller and ignoring the judgement of McClintock, county supervisors in 1999 and 2000 accepted the low cost estimates provided by CalPERS and offered county employees dramatically enhanced retirement benefits on a retroactive basis, Harn explained. It should be noted El Dorado Irrigation District and just about all surrounding counties have more lucrative and expensive retirement plans than El Dorado County does, he added.

The county needs more tools and options that are not currently available to reduce these unaffordable and insurmountable unfunded obligations,” he said. “The Board of Supervisors should seek the assistance of California State Association of Counties, CalPERS and our representatives in the Legislature so that changes in state law and CalPERS policies will provide better options to enable us to reduce these unaffordable obligations. What we can do locally now is work to set aside significantly more funds in our reserves to help cover these costs in the future.