The county’s taxpayers will spend $154,626,037 within the next two months to cover the cost of pensions for retired county employees in the upcoming fiscal year.
This week the board of supervisors authorized auditor-controller/treasurer/tax collector Larry Walker to make an advance payment of the county’s estimated fiscal year 2012-13 annual contribution to the board of retirement within 30 days after the commencement of the county’s fiscal year July 1.
According to Walker, “For fiscal year 2012-13, the total county general fund retirement contribution is estimated to be $160,533,900, discounted by $5,907,863, at a simple interest rate of 3.68%, for a prepayment amount of $154,626,037.”
Walker said “Government Code 31582 allows the county to advance pay part or all of the county’s estimated annual retirement contribution, if paid within 30 days after the commencement of the county’s fiscal year. The county has taken advantage of this alternative in the past, prepaying the general fund contribution to the Board of Retirement for the entire fiscal year. The prepaid amount is discounted by the Board of Retirement, resulting in savings for the general fund. For fiscal year 2012-13, the county has calculated a 3.68% simple interest discount rate, which results in a discount of $5,907,863 to the general fund.”
Walker said he and the office of county CEO Greg Devereaux had analyzed the financial impact of prepaying the retirement contribution, and “determined that the county will benefit from the transaction. The estimated retirement contribution of $160,533,900 and related discount amount of $5,907,863 are estimated and may decrease. These amounts may be recalculated to reflect estimated earnable compensation for 2012-13 at the time the advance payment to the Board of Retirement is made. Any benefit or loss realized by the Board of Retirement as a result of the retirement pre-payment will be incorporated into San Bernardino County’s employer contribution rates, thus ultimately accruing to the county.”
The payment reflects a potentially problematic trend that signals financial difficulty for the county in the future. Last year, the county likewise made a prepayment to the Board of Retirement to cover the cost of pensions for retired employees over the current 2011-12 fiscal year. That payment was for $132,263,097, which reflected a prepayment discount of $5,299,603 from the $137,562,700 owed by the county as its annual contribution to the retirement fund.
In this way, county taxpayers are currently seeing a $22,362,000 per year increase in the cost of paying for pensions.