HomeMy WebLinkAboutMINUTES - 02262002 - C111 C.111
THE BOARD OF SUPERVISORS OF
CONTRA COSTA COUNTY, CALIFORNIA
Adopted this Order on February 26, 2002, by the following voter
AYES: Supervisors Uilkema, Gerber, DeSaulnier, Glover and Gioia
NOES: None
ABSENT: None
ABSTAIN: None
The Board ACCEPTED the Grand Jury Report No. 0201, entitled "County
Finances in Jeopardy" and REFERRED the matter to the County
Administrator for response.
I hereby certify that this is a true and correct copy of
an action taken and entered on the minutes of the
Board of Supervisors on the date shown.
Attested:February 26,2002
John Sweeten,Clerk of the Board
of Supervisors and County Administrator
By: 0
Deputy Clerk
Y
A REPORT BY
THE 2001-02 CONTRA COSTA COUNTY GRAND JURY
725 Court Street
Martinez,California 94553
Deport.No. 0201
CONTRA COSTA COUNTY EMPLOYEES' RETIREMENT ASSOCIATION
"COUNTY FINANCES IN JEOPARDY"
APPROVED BY THE GRAND JURY:
Date:
ROBERT COWAN
GRAND JURY FOREMAN
ACCEPTED FOR FILING:
Date: A ► oC �'
MICHAEL R. COLEMAN
JUDGE OF THE SUPERIOR COURT
r-
CONTRA COSTA COUNTY REPORT NO. 0201
Contra Costa County Employees' Retirement Association
"County Finances in Jeopardy"'
BACKGROUND
The Contra Costa County Employees' Retirement Association(CCCERA) is a contributory
defined benefit plan initially organized under the provisions of the County Employees'
Retirement Act of 1937 (37 Act)July 1, 1945. It provides benefits upon retirement, death or
disability of members. CCCERA operates as a cost-sharing, multiple employer defined benefit
pension:plan that covers substantially all of the employees of the County of Contra Costa and
nineteen other member agencies. An example of another member agency is a Special District
such as Contra Costa County Water District.
CCCERA is administered by a beard of nine trustees which are appointed or elected by the
following:
Five(5)elected by retirees or bargaining units(unions).
Four(4) appointed by the County Board of Supervisors.
One(1)by Office: the elected.County Treasurer.
FINDWGS
I. Employers, primarily Contra Costa County(and herein referred to as the
"County"), contributed approximately 77% of the revenue of CCCERA, exclusive
of investment income,during calendar year 2000.
2. By law, the County is required to make contributions to ensure that CCCERA has
sufficient funds to pay benefits. If action by the Board of CCCERA and approval
by the Board of Supervisors increases benefits beyond the availability of funds,
the additional monies will come from the taxpayers of Contra Costa County.
3. Most County retirees have been reasonably protected from inflation by cost of
living adjustments, known as COLA. However, those who retired prior to 1982
have lost significant buying power due to capped COLA and high inflation.
4. At its January 30,2001 meeting, the Board of CCCERA voted to take action to
give an additional $200 benefit monthly to alb retirees. (Survivors of County
retirees would receive an additional $120 per month benefit.) The increased
benefits are to`be fully funded from excess earnings. Excess earnings, defined as
investment only earnings in excess of 8%, have been transferred to the County in
past years to reduce employee/employer contribution rates. All five County
Supervisors attended this meeting and cautioned the Beard of CCCERA to
consider the effects of their proposal on county finances.
S. In their October 1, 2001 letter to the County Administrator, the Board of
CCCERA stated that their actuary estimated $124 million was;required to fund
the proposed benefit increase with a retirement eligibility date of January 1, 2001.
& Legislative action was necessary to increase the benefits and the matter was taken
to State Senator Tom'Torlakson to introduce a bill. The Board of CCCERA
drafted SB 795. The fiscal impact of the bill was described as `unknown'. SB
795 was passed'by both houses of the State Legislature and signed into law by
Governor Davis on July 16,-.2001.
7. The Board of CCCERA set the eligibility date of January 1, 2002 for those retired
employees who will benefit from the proposed monthly benefit increase of$200
A Board member of CCCERA stated that this January 2002 date was selected
rather than adhering to the target of assisting long time retired members, as that
would involve"complex calculations."
8. If the County Supervisors adopt the recommendations of the,Board of CCCERA
for the January 1, 2002 eligibility date:
A. Retirees currently receiving retirement benefits of over $100,000 annually
would receive the$200 per month increase.
B. Even retirees currently receiving retirement benefits of less than $10.00
per month would receive the$200'per month increase. These are retired
employees who worked a short time for the County and are collecting
retirement benefits from another source.
C. Employees who retire by December 31, 2001 would also be eligible to
receive the $200 extra monthly benefit.
D. There were 5560 people receiving retirement benefits as of
December 31, 2000.
9. The;Board of CCCERA approved a motion to increase the real rate of return
component of the interest rate assumption from 8.25%to 8.50% effective July 1,
2001. The effect of raising this assumption is to increase the apparent unallocated
reserve from which the benefit increase will be drawn. This increase in the rate of
investment was instituted during a period when actual long-term interest rates
were at a 30-year low. This new rate of 8.50%is the highest assumed rate'of
return for any retirement association organized under the 1937 County Employees
Retirement Act.
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10. Approval of the new benefits for Contra Costa County retirees that cannot be
supported by CCCERA investment income will result in`a liability to be covered
by the County General Fund. This potential deficit can only be compensated for .
by employee layoffs and program cuts and/or increased taxes.
I I., The first priority and obligation of the County General Fund is payment of
benefits under the 37 Act.
CONCLUSIONS
1. In its recommendation to increase the benefits of all retirees by$200 per month,
the Board of CCCERA has not actedin a financially prudent manner with respect
to its fiduciary responsibility to the County.
2. Adoption of'the recommendation of the Board of CCCERA.by the Supervisors of
Contra Costa County will place the finances of the County in jeopardy.
3. The services and support activities of Contra Costa County stand to be degraded
with the implementation of the recommendations of the Board of Trustees of the
CCCERA.
4. The additional $200 ger month benefit is uneven in its application since many
retirees already receive substantial pensions while<others have not been fairly
compensated because of the cap on COLAs and inequitable adjustments.
RECOMMENDATION
1. The 2001.2002 Contra Costa County Grand Jury recommendsthatthe Board of
Supervisors reject the recommendation of the Board of CCCERA which
establishes December 31, 2001 as the retirement date to increase the benefits of
every retiree in the County by$200 per month.
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