County taxpayers will pay more than one-quarter of a billion dollars within the next five weeks to cover the cost of pensions for the county’s retirees in the upcoming 2018-19 fiscal year.
Next week the board of supervisors is set to authorize Auditor-Controller/Treasurer/Tax Collector Oscar Valdez to make an advance payment of the county’s estimated fiscal year 2018-19 annual contribution to the board of retirement within 30 days after the commencement of the county’s fiscal year July 1.
According to a report/recommendation from Valdez to the board of supervisors bearing next Tuesday’s date obtained by the Sentinel, “The total county general fund retirement contribution for 2018-19 is estimated to be $262,463,800, discounted by $8,205,753 (at a simple interest discount rate of 3.13%) for the prepayment amount of $254,258,047.”
Valdez said, “Government Code Section 31582, Subdivision (b), allows the County of San Bernardino to make an advance payment of all or part of the county’s estimated annual retirement contribution, provided that the payment is paid within 30 days after the commencement of the county’s fiscal year. The county has taken advantage of this advance payment 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 to the general fund.”
According to Valdez, “The county has calculated a 3.13% simple interest discount rate for fiscal year 2018-19, which results in a discount of $8,205,753 to the general fund. The auditor-controller/treasurer/tax collector and the county administrative office analyzed the financial impact of prepaying the retirement contribution, and have determined that the county will benefit from the transaction. The estimated retirement contribution of $262,463,800 and related discount amount of $8,205,753 are estimates and may change. Any benefit or loss realized by the board of retirement as a result of the retirement advance payment will be incorporated into San Bernardino County’s employer’s contribution rates, thus ultimately accruing to the county.”
In 2017-18, the total county general fund retirement contribution was $222,388,000, discounted by $7,236,227, at a simple interest discount rate of 3.25%, for a prepayment amount of $215,151,773
In 2016-17, the total county general fund retirement contribution was $211,164,300, discounted by $7,373,705, at an interest discount rate of 3.49%, for a prepayment amount of $203,790,595.
In 2015-16, the total county general fund retirement contribution was $218,014,200, discounted by $7,696,277, at an interest rate of 3.53%, for a prepayment amount of $210,317,923.”
With the exception of 2016-17, the county’s retirement costs have been escalating.
In 2011, the county made a $132,263,097 prepayment to the board of retirement to cover the cost of pensions for retired employees during the 2011-12 fiscal year, reflecting a prepayment discount of $5,299,603 from the $137,562,700 owed by the county as its annual contribution to the retirement fund that year.
In 2012, the county made a $154,626,037 prepayment to the board of retirement to cover the cost of pensions for retired employees during the 2012-13 fiscal year, reflecting a prepayment discount of $5,907,863 from the $160,533,900 owed by the county as its annual contribution to the retirement fund through June 30 of 2013.
In 2013 the county made a $172,478,057 prepayment to the board of retirement to cover the cost of pensions for retired county employees during the 2013-14 fiscal year, reflecting a prepayment discount of $6,589,943 from the $179,068,000 owed by the county as its annual contribution to the retirement fund through June 30 of 2014.
In 2014-15, the county made a $182,185,164 prepayment to the board of retirement to cover the cost of pensions for retired employees during the 2014-15 fiscal year, reflecting a prepayment discount of $6,922,236 from the $189,107,400 owed by the county as its annual contribution to the retirement fund that year.
In this way, county taxpayers have seen an average $17,427,850 per year increase in the cost of paying for pensions over the last seven years.
-Mark Gutglueck