Fresno County pension cuts create wide gap in benefits for new hires

The Fresno BeeJanuary 6, 2013 

For the thousands of people making a living in Fresno County government, it's become a situation of haves and have-nots -- at least when it comes to the lucrative benefit of pensions.

Those just starting to work for the county are now bearing the brunt of government belt-tightening while their veteran colleagues and predecessors continue to enjoy the assurance of a very comfortable retirement benefit.

The county's latest pension plan, ushered in with the New Year, has incoming employees retiring with nearly half the monthly pension that employees hired just a few years ago will get, a difference that can add up to hundreds of thousands of dollars over a lifetime.

On top of this, most new employees will have to work more years before they're eligible for retirement pay.

"It's easy to give a reduced benefit to these people," said Phil Kapler, who manages the county retirement system, although he doesn't determine the benefit levels. "There are so few stakeholders. There are so few to have concern about this disparity."

The disparity is not unique to Fresno County. Across the San Joaquin Valley, cities and counties have pared down retirement benefits both voluntarily and in response to Gov. Jerry Brown's pension reform legislation, which took effect Jan. 1.

But in Fresno County, where pensions are among the most generous in the state, the difference between the old and new benefit plans is perhaps the most profound.

There isn't a simple way to compare county pension plans. Exact benefit levels are based on a complex formula that accounts for an employee's age, years of service and final salary. But a sample sheds light on the startling disparity.

Take a 60-year-old county employee (non-public safety) who leaves after 30 years earning $69,000 annually -- the average pay a career Fresno County employee retires with.

If the employee was hired before 2005, when the county began rolling back benefits, the employee would receive an annual pension of nearly $68,000. Under the latest plan, the employee would get about an annual pension of about $37,000.

The minimum age to retire with a pension also changes -- from 50 to 52.

While the benefit is still respectable by most standards, county leaders and labor representatives both acknowledge that the changes have essentially created a second-class employee.

Labor and management see the root of the inequity differently.

"I don't think we're treated with the level of respect we deserve," said Michael Vasquez, an officer for the local chapter of Service Employees International Union.

Vasquez blames county management for not bargaining with union representatives to come up with a more equitable pension plan for new employees. He believes the disparity could create bad feelings in the ranks, although he says it's not for the union's lack of trying.

The county's Board of Supervisors, which has final say over benefit levels, insists that pension cuts for new employees are the only way to reduce soaring retirement costs.

This year, the county is saddled with a $220 million pension bill. The tab eats up more than 10% of the county budget and is almost twice what it was five years ago. The increase is due to commitments supervisors made without the money to fund them.

Since the supervisors can't legally reduce the pension benefits they've already promised, the benefits of new employees are the obvious target.

"We just can't give away something that we can't afford," Supervisor Judy Case said.

Since 2005, the county has introduced four new pension plans, each offering a reduced benefit for new employees and increasing savings for the county.

About 80% of the county's 6,200-person work force, however, was hired under the original pension plan, which means significant cost reductions for the county won't come until these employees are off the books -- at least a decade or so out.

The county's newest pension plan is the result of a new state law. The law caps pension payouts and requires employees to make greater pension contributions in cities and counties where retirement checks are too high, as deemed by a calculus set forth in the legislation.

Under the law, the county had to slightly scale back its last benefit plan, which began in June, for new non-public safety employees. Whether or not the law will affect the benefits of public safety employees, whose pensions are calculated differently, still is being determined.

The state law also will require existing county employees to contribute more to their pensions. Currently, most county employees pay 25% of the expected cost of their retirement through payroll deductions. A 50% contribution is being phased in.

While some local governments are exempt from the state law, including the city of Fresno since it's a charter city, other communities also introduced new retirement plans this month to comply with the new rules.

New employees who work for the state are seeing reduced benefits as well.

Clovis City Manager Rob Woolley doesn't expect anyone to take much notice of the changes in his office. And he doesn't expect the changes to start reducing the city's expenses for at least five years.

New employees in Clovis are poised for a significantly reduced pension plan, although contribution levels for existing employees will not change because employees already are paying as much as the state law requires.

"When new employees start out, particularly in this economic environment, just getting a job with benefits is a positive," Woolley said. "As they mature into the work force, I think (the changes) might become a bigger issue for them."

The reporter can be reached at (559) 441-6679, or @KurtisInValley on Twitter.

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