Both are 62, only a few years before their normal retirement. The county has a huge problem–probably bigger than any other local jurisdiction. They face a deficit upwards of 24 million dollars which is greater than one-third of the county’s general fund budget.
These retirements come at a high price though as the various departments will lose experience workers. But that is not all.
But in a report that appeared Friday in the North County Times covering Riverside and San Diego Counties, they such that while these retirments are very appealing and seemingly a painless way to cut expenses, there are pitfalls.
Giving away service years as an early retirement incentive is common, said Jack Dean, editor and publisher of pensiontsunami.com, which tracks developments in public employee’s pension plans.
“It’s a sleight of hand to say that is saving money,” he said. “Elected officials don’t seem to realize they are paying (increased) pension costs later.”
Dean cited the recent case of Vallejo, about 25 miles northeast of San Francisco, which filed for bankruptcy last year, saying it was overwhelmed with pay, benefit and pension costs.
Marcia Fritz, a certified public accountant and vice president for the California Foundation for Fiscal Responsibility, agreed.
“If Vallejo could scale back pay, benefits and pension costs, (the city) would make it,” Fritz said. If they can’t get concessions, Fritz says the city’s prognosis is grim.
Offering early retirements “is a crazy, crazy thing to do,” she said.
Part of whether or not there is real savings here will depend on whether the position being vacated is actually cut from the budget. In that case the early retirement would effectively be a layoff.
The understanding is that the county is cutting for example Barry Melton’s position and then essentially leaving his position vacant rather than promoting the next in line. The next in line is becoming an interim or acting Public Defender and thus not making the salary of the top spot.
What the county wants to avoid is hiring new workers at a lower wage for that would be a very modest and temporary savings.
CalPERS requires that the positions being target be held vacant for a certain number of years as means to help avoid lay-offs. While several Davis City employees have expressed an interest in this kind of incentive, the city has not offered any CalPERS to date.
The bottom line here is that down the line, pension costs are an issue that are going to have to be addressed. In the short term, it makes it a bit easier for the county to retire people a bit early rather than lay off younger workers, but the saving derived from that will be dependent on leaving those positions open and not hiring younger workers to fill the void.
—David M. Greenwald reporting