County of Sonoma issues annual report on health of retirement system

The County of Sonoma has reduced its unfunded pension liability by 30 percent over the last four years, the result of strong investment returns and decisions by the Board of Supervisors to make early payments on the county’s unfunded liability, according to the fourth annual State of the Retirement System report presented to supervisors today.

The unfunded pension liability, which stood at $778 million in June 2017, had shrunk to $543 million in June 2021, according to the report. The unfunded liability included $287 million in outstanding principal balance for pension obligation bonds issued in 2003 and 2010.

“We’ve worked hard to get to this point,” said James Gore, chair of the Board of Supervisors. “We have striven to strengthen the county pension plan, contain cost increases that threaten our ability to fund essential county services, and save taxpayers money by accelerating payments on our unfunded pension liability. This report shows we are moving in the right direction.”

The pension plan for county employees was 91.3 percent funded as of Dec. 31, 2020, compared with 80 percent for CalPERS, the retirement system for state workers.

The report projects the county’s pension costs will decline in the 2023-24 fiscal year as the county pays off the 2003 pension obligation bonds. The county remains on track to pay off the 2010 bonds by the end of this decade.

Since 2015, the Board of Supervisors has worked to reduce the county’s interest expenses by making early payments on the unfunded liability, a term used to describe the gap between the assets in the pension fund and the amount owed to county retirees. In 2019, the Board began committing an annual sum equal to 0.5 percent of the county’s payroll toward reducing the unfunded liability, while continuing to supplement those prepayments with one-time payments when able. By the end of the current fiscal year in June, the county will have made $17.8 million in early payments on the unfunded liability, a policy decision that will eliminate an estimated $20.5 million in interest costs over the next 15 years, and more over time.

Reducing pension costs is a top priority of the Board of Supervisors, which has enacted policies to make the pension system fair, equitable and sustainable for taxpayers and employees alike. The Board is guided by three overarching policy goals for pension reform: contain costs, maintain labor market competitiveness and workforce stability, and improve accountability and transparency. The annual State of the Retirement System report reflects the Board’s commitment to accountability and transparency. 

Overall, the county spent $126 million on pensions in the 2020-21 fiscal year, equivalent to 18.2 percent of the county’s total salaries and benefits and 7.8 percent of operating revenue.

The plan is managed by the Sonoma County Employees’ Retirement Association. It contained $3.07 billion in assets at the end of 2020, up from $2.92 billion at the end of 2019. It covered 4,090 active employees, 5,347 retired employees and beneficiaries, and 1,445 vested employees who have deferred their benefits.

The fourth annual State of the Retirement System report presents information on Sonoma County’s pension system, including updates on cost sharing with employees, legal issues, historical trends, future projections, pension obligation bonds, unfunded liabilities and SCERA’s 2020 actuarial valuation and risk report. The report can be viewed at https://bit.ly/3qY8US5

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Media Contact:
Ted Appel
Communications Specialist
publicaffairs@sonoma-county.org 
(707) 565-1964
575 Administration Drive, Suite 104A
Santa Rosa, CA 95403