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Study finds $135.7B in local pension liabilities for California jurisdictions
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SACRAMENTO (AP) — Two dozen city and county governments in California face a combined $135.7 billion in unfunded pension liabilities, according to a study released Tuesday that also found the problem is growing.

The Stanford Institute for Economic Policy Research and a nonprofit group, California Common Sense, evaluated 24 local government pension systems that are not part of the California Public Employees' Retirement System, the state's main pension fund. The funds ranged from those for smaller entities, such as Santa Barbara and Stanislaus County, to the largest local governments in California, including Los Angeles, San Diego and San Francisco.

The report found that none of the systems is at least 80 percent funded, which often is used as a benchmark for the minimum funding level of pension funds. The study assumed a 5 percent annual rate of return for the funds' investments, much more conservative than the 7.75 percent or greater annual return rate assumed by many of the funds.

The two retirement systems operated by the city of Fresno came close, with a funded ratio of 78.5 percent, while the pension system in neighboring Kern County was only 41.5 percent funded.

"Each system substantially understates liabilities and overstates funded ratios," the report stated.

Anne Holdren, executive director of the Kern County Employees' Retirement Association, said the county's pension system uses different assumptions than Stanford's group. She said the association projects it has a 60 percent funded ratio, which has prompted the pension board to schedule a review of its funding levels.

"The board has all these very strict governance and funding policies to assure that the funding is enough to meet their liabilities," Holdren said.

Kern County's Board of Supervisors has been trying to negotiate concessions from public employee unions since June 2010. The board is pressing for lower pension formulas for new workers, and retirement and health care contributions from older employees who don't currently pay.

A tentative agreement has been reached with public safety unions, but the county remains at an impasse with other labor groups.

Tuesday's report was co-authored by California Common Sense, a student-oriented nonprofit organization at Stanford that focuses on government transparency. The study found that benefits paid to retired workers also vary.

Government retirees in the city of Los Angeles received the highest pensions in the 2009-2010 fiscal year, with an average annual benefit of $46,211. Stanislaus County was the lowest at $24,179 a year.

Public safety employees retire with more generous benefits. The average pension for a retired peace officer or firefighter in Fresno County was $48,732, while the average in San Jose city was $90,612.

The study found that spending on public employee pensions has grown 11.4 percent a year since 1999, making it the fastest-growing cost for cities and counties.

Los Angeles County spokesman David Sommers said the county has been careful to protect taxpayers and disputed some of the report's findings. He estimated that Los Angeles County's pension system is 90 percent funded.

He also said it has been revised four times since 1977, including four separate benefit rollbacks and increases in employee contributions.

"We've been very conservative over the decades, not spending in good years to the detriment of bad years," Sommers said.

Los Angeles County pulled out of the Social Security system three decades ago, he said. The county also negotiated no cost increases in its current labor contract, which will save taxpayers in the future, Sommers said.

The report's authors said the study represents 99 percent of the independent public employee pension systems in California. It is being released at a time when Gov. Jerry Brown seeks to bring public-sector retirement benefits more in line with those in the private sector and as weak investment returns are adding to the unfunded liabilities of many government pension funds.

Residents in San Diego and San Jose are expected to vote on pension reform initiatives in June, but unions are fighting back.

The California Public Employee Relations Board ruled last week that San Diego's initiative to move most new employees into a defined-contribution plan amounts to an unfair labor practice because city officials failed to negotiate with workers first. The board filed a lawsuit to try to remove the measure from the city's ballot.

On Tuesday, San Diego County Superior Court Judge William Dato refused to disqualify the initiative, saying the issue can be dealt with after the election.