Report reveals $3.66B funding gap for Riverside County pensions

A report Tuesday to the Riverside County Board of Supervisors has revealed the county’s pension liabilities, indicating diminishing funding levels and a growing unfunded pension gap.

The county’s retirement system is currently 75.3% funded, a decline from the 86.6% reported in 2023. A $3.66 billion gap has emerged, more than doubling from the previous year’s $1.88 billion shortfall. This data, sourced from the latest confirmed figures by the California Public Employees’ Retirement System, or CalPERS, is based on calculations from the close of fiscal year 2021-22.

Despite this, the supervisors’ Pension Advisory Review Committee report forecasts an optimistic reversal over the next eight years, with expectations that the funding status will recuperate 80% higher than its current value.

The current pension system, supported by $11.2 billion in assets, may see an increase in workers’ required contributions to CalPERS due to a classification into two primary categories: safety and miscellaneous. Safety encompasses law enforcement roles such as sheriff’s deputies and district attorney’s office investigators, while miscellaneous accounts for a wider array of public service positions.

As PARC suggests, pension and healthcare costs will surge, facing Riverside County with an imminent fiscal challenge that, according to Supervisor Kevin Jeffries, constitutes an “incredible nut to crack,” predicting up to $600 million in new costs over a span of 36 months. CalPERS’ investment performance stands as a determining factor, with losses recorded in fiscal year 2021-22 of 6.1% in stock market assets, although a 6% resurgence in 2023 offers a sliver of hope.

The county’s strategic responses include issuing bonds worth $716 million at preferential interest rates to counteract the pension debt, likening it to “using a credit card to pay off a credit card to pay off a credit card” as described by Jeffries during the 2020 issuance. This financial maneuver adds to prior bond issuances aimed at long-term pension obligation reduction.

Personnel policies have also evolved, transitioning certain employees from “3% at 50” retirement earnings to less generous “2% at 50” and “2% at 60” formulas following legislation changes.

The broader context of state retirements mirrors these local concerns, with CalPERS reporting a 14% decline in state retirements in 2023, the lowest in five years. This trend differs from the spike during the pandemic, suggesting a shift in retirement behavior.

Cost rises and ongoing economic pressures may be compelling public employees to extend their working years. Such actions increase personal retirement benefits and service years, an effect seen notably among younger baby boomers grappling with financial insecurity.

Amid these financial pressures, Riverside County reported a moderate improvement in its fiscal position.

Boosted by higher-than-expected revenues, including property taxes and interest earnings, its discretionary revenue for the 2023-2024 fiscal year exhibited stable growth. Predicted losses are offset by these gains, according to the Executive Office, which presented this midyear financial data to the Board of Supervisors.

The county foresees fiscal challenges, such as the Emergency Management Department’s unplanned outlays due to Tropical Storm Hilary and elevated costs impacting service level maintenance and labor negotiation demands.

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