Common Union Enemy Making Rivals Derry & Rutherford Allies

(July 27)  Over the last eighteen months, supervisors Janice Rutherford and Neil Derry have developed an oftentimes distant relationship that sometimes flared into an outright hostile political rivalry. Shortly after Rutherford was elected to the board in November 2010 and sworn into office the following month, she formed an alliance with supervisor Josie Gonzales, who like her had formerly served on the Fontana City Council, and supervisor Gary Ovitt, who had for a short time in 2009 and 2010 been aligned with Derry. On practically every issue where there has been a substantial difference among the board’s members, the Rutherford/Gonzales/Ovitt troika has prevailed, leaving the coalition of Derry and supervisor Brad Mitzelfelt politically outmuscled and on the outside looking in.
On a few occasions Rutherford and Derry made pointed verbal note of their differences, trading barbed comments or hurling insults at one another.
But last week, Rutherford and Derry found themselves thrown together, standing out in sharp relief as the targets of an attack by the largest public employee union in San Bernardino County.
The San Bernardino Public Employees Association represents over 18,000 of the county’s employees as well as workers with several of the county’s municipalities. Both Rutherford and Derry earned the union’s enmity by taking public stands calling for substantial public employee pension reform.
On July 18, Derry introduced an initiative he is proposing to place on the November 6 ballot calling for public pension reform to address the mounting costs of county employee retirement obligations.
Noting that pension costs as a percentage of total county expenditures had risen from three percent in 1999 to nearly ten percent of all expenditures in 2011 and that the county is currently shelling out $232 million per year to provide its former employees with pensions, Derry said the burden on the county and its taxpayers to sustain the pension fund will grow if the stock market, in which much of the pension fund has been invested, continues to do poorly.
“Simply put, actuarial and investment return assumptions have not lived up to projections and county taxpayers are subjected to an unabated and underfunded pension obligation that cannot be sustained under present conditions,” Derry, who represents the Third District, stated. The Third District includes Twentynine Palms, Joshua Tree, Yucca Valley, Big Bear, Yucaipa, Highland, Redlands, Loma Linda and a portion of the city of San Bernardino.
A problem with the system, according to Derry, is that the county and its taxpayers have guaranteed county employees a defined pension that will be provided to those retirees, even if the retirement fund through its investments does not perform adequately to make those retirement contributions, necessitating that the county in each of its yearly budgets take up the slack such that the budget for basic government services is reduced to make sure those who have retired receive their pensions.
The ballot measure Derry is proposing would increase the retirement age for new county employees, decrease the amount of money employees could earn each year towards their pension benefit, require all new and current employees to contribute to their pensions, and minimize steep increases in pension amounts, referred to as “spiking,” by averaging annual compensation over the final three years of an employee’s employment rather than the current single highest year, which often includes the addition of payouts for accrued vacation and leave time and educational, cell phone, clothing and travel allowances.
Currently, public safety employees are eligible to retire at the age of 50 and draw a pension equal to three percent of their highest year of pay including all of the add-on allowances used to spike their compensation times the number of years they have worked for the county. Non-safety employees are eligible to retire at the age of 55 and draw a pension equal to two percent of their highest year of pay including all of the add-on allowances used to spike their pay times the number of years they have worked for the county. Derry’s proposal calls for adjusting the retirement formula so that public safety employees would be eligible to receive two percent of their pay upon retirement and non-safety employees would not be able to retire until they reach the age of 62.
Derry’s proposal would also eliminate the obligation that the county guarantee the amount of the pensions provided to retirees when the pension fund’s investments generate less than 7.5 percent earnings calculated to provide full coverage to pensioners.
“It is unrealistic to expect the taxpayers to shoulder all the risk for these risk-free pensions at the same time they are bearing all the risk with respect to their own retirement accounts,” Derry said.
Before it can be submitted to the voters, the board of supervisors must vote to place it on the ballot by August 9.  Supervisor Derry said he will introduce the proposal to the board on July 31.
In a opinion piece published in the Inland Valley Daily Bulletin on July 19, Rutherford, who represents the Second District, which includes the cities of Fontana, Rancho Cucamonga and Upland, San Antonio Heights, Lytle Creek, Devore, and the mountain communities of  Mt. Baldy, Rim of the World, Crestline and Lake Arrowhead, cited what she said was $375 million the county is paying toward pensions for its retired employees in fiscal 2012-13 and future unfunded pension liabilities of $2.25 billion.
“That pension debt will crush our county’s ability to stay competitive when it comes to attracting businesses, and our children will be the ones who suffer most if we do not act now to restructure our pension system,” Rutherford wrote. She pointed out that over the last ten years the county’s pension system has only produced an average 4.8 percent investment return while the pension system’s solvency is relying on the assumption that investment returns will average about 7.75 percent. Rutherford said the debt the county is accruing in keeping the pension system afloat will “push local governments off the financial cliff and straight into bankruptcy court.”
Rutherford said “Communities with mammoth pension liabilities and no plan to rein them in will eventually have to raise taxes or dramatically cut services or both to meet their obligations to retired employees. The system needs an overhaul now.” She then referenced her earlier “proposal to place an initiative on the ballot that would require voter approval of any future increases to county employee retirement benefits” and played some of the same themes Derry explored. “In addition, county employees must contribute more of their own money toward their own retirements,” Rutherford said. “We also need to look at increasing the retirement age, which stands at 50 for safety employees and 55 for general employees. And the practice of “spiking” pensions with unused vacation, compensation time, and other perks to boost monthly payouts must end.”
Fiscal reality is making generous retirement packages for public employees untenable, Rutherford said. “The more taxpayers have to put into the public retirement system, the less is available to pay for the police and fire protection, roads, jails, landfills, parks, courts and other public services we need.”
On its website, the San Bernardino Public Employees Association lumped Derry and Rutherford together, posting in bright red an alert headlined “County Board Of Supervisors Attack (sic) Pensions,” which stated “Some members of the board of supervisors are preparing to launch another attack on the pensions of hard working county employees!”
The alert goes on to state that “Supervisor Janice Rutherford has scheduled the re-introduction of her previous initiative that would require voter approval of any future pension formula increases. Instead of negotiating at the table, Supervisor Rutherford believes the county should jam it down the throats of county employees and fight it out in court! What deficit? The county apparently has millions to spend on legal fees!”
The alert then turns to Derry, who is currently locked in a reelection effort against James Ramos, who has been endorsed by the San Bernardino Public Employees Association in the November election. The alert’s language obliquely states that Derry will not win reelection as supervisor.
“On July 31, 2012 at 10:00 a.m. outgoing Supervisor Neil Derry has agendized a new attack to show the level of his dislike for county employees! He will introduce an initiative that will make the formula for non-safety employees 2% at age 62, and safety employees would be 2% at age 55. If approved by the voters, his initiative would also reduce all county non-safety salaries by 7%, but not his own salary!”
The alert then commends the union’s members to “Prepare for action 7/32/2012!!!”
The union’s alert, approved by San Bernardino Public Employee Association President Paula Ready, while perhaps galvanizing the county’s rank and file, succeeded in forging what previously seemed an implausible alliance between Derry and Rutherford.
In his public announcement of his ballot proposal, Derry said his call for a vote on the matter “follows substantive dialogue by the board of supervisors over the last couple of years and is a natural extension of our recognition that reforms need to be implemented.  I particularly wish to praise supervisor Janice Rutherford for her leadership on this issue.”

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