O.C. Grand jury finds $3.3 billion retirement hole

So let’s start with the bracing news: Orange County cities have promised their workers more than $3.3 billion in retirement benefits that they do not have.

But smile in the face of danger: Thanks to unpleasant prodding from CalPERS, they’ll be painfully paying down that debt in coming years. It will hurt – likely impacting programs for Joe Citizen – but it should not cripple any bergs in O.C. (though the same obviously can’t be said for the likes of Stockton, San Bernardino or Vallejo, which are either in or teetering on the edge of bankruptcy, thanks largely to retirement obligations).

This latest in local public pension number-crunching comes courtesy of the Orange County grand jury, which examined unfunded liabilities and urged greater transparency in a recent report.

“The 2013-2014 Grand Jury is aware that there is a political element to any discussion of unfunded pension liabilities,” it said up front. “Unions may view the problem as being exaggerated as a means to weaken the power of public employee unions and strip hard-won benefits and influence future negotiations. Others are concerned with the affordability of pensions that many people describe as ‘generous.’” (We at The Watchdog cop to that last part).

“The public commitment to addressing the issues in a timely manner and accepting some pain now and not pushing the issues off to the future must be in place,” the grand jury continued in a slightly-scolding tone. “If unfunded pension liabilities are not addressed, cities could reach a crisis where outcomes are painful enough that they affect the quality of life in Orange County.”

Big picture:

  • Orange County cities have promised workers $10.45 billion in retirement benefits.
  • They have set aside $7.13 billion to pay these benefits.
  • That, unfortunately, leaves them the aforementioned $3.32 billion short.
  • On average, O.C. cities have just 68.2 percent of the money they’ll need stashed away – far less than the 80 percent figure many strive for (though some experts say even 80 percent isn’t good enough).
  • The most underfunded city is Costa Mesa, at just 61.9 percent, followed closely by Newport Beach (62.2 percent), Garden Grove (65.8 percent) and Huntington Beach (66 percent).
  • The most well-funded cities are Laguna Niguel, Laguna Woods, Dana Point, Lake Forest and Aliso Viejo, all at 77.2 percent.
  • For a great many, what they owe exceeds what they spend in an entire year; for some, it exceeds what they spend in two years.

Why should you care? These retirement benefits are guaranteed. If there’s not enough money in the pot, California taxpayers must make up the difference.

“Money spent by OC cities to deal with unfunded pension obligations necessarily comes at the expense of other services cities provide to their residents,” the grand jury wrote. “Catch up contributions to amortize these unfunded liabilities can be a significant expenditure in a city’s budget, and the growth and unpredictability of these unfunded liabilities make it difficult to budget for future years.

Continue reding at the O.C. Register…