A state senator introduced legislation Tuesday that would alter the way Kern County's pension system works, something urged by county supervisors but feared by some retirees.
State Sen. Jean Fuller, R-Bakersfield, introduced SB 1056 as a "spot bill" -- meaning legislation without language or a title designed as a "place holder."
It would freeze the flow of cash into an obscure pension fund when it has more than 120 percent of the money it is expected to need to fund current and future benefits.
Kern County supervisors say the move would help the county deal with more than $200 million a year in pension contributions required to prop up faltering investment funds of the Kern County Employees' Retirement Association.
But some retirees see it as a threat to their hard-earned money. They gave supervisors an earful over the issue last week.
Kern County legislative analyst Allan Krauter said the county is working behind the scenes to calm the concerns, pull together some concensus and develop language for Fuller to consider.
At the center of all this is the KCERA's Supplemental Retiree Benefit Reserve fund. It's an obscure little $185.7 million fund buried within the complexities of KCERA's overall $3.1 billion pension investment portfolio.
It funds a range of extra pension benefits designed to protect retirees' buying power from cost of living increases as they age.
The SRBR pays for those benefits by capturing 50 percent of the main fund's "excess earnings" when profits flow in during the best market years.
That has a massive impact on KCERA's main investments. Analysts say those periodic drains on excess earnings ensure that the main fund never reaches its target rate of return of 7.75 percent.
To compensate for that, the county of Kern -- and a host of other government districts that fund their employees' retirements through KCERA -- pour more money into the fund.
Currently, the SRBR fund has 176 percent of the funds it needs to provide all the benefits it has been committed to pay for into the future.
The main KCERA fund, by contrast, is currently 61 percent funded.
In the world of self-funded government pension systems, the SRBR benefit is rare.
Counties can create an SRBR under the 1937 legislation that created county pension funds. Only three counties -- Kern, Tulare and Alameda -- adopted the optional benefit.
Changing how that benefit works, once created, requires a change to the pension law.
Supervisors have recruited Fuller to carry legislation that would stop all investment payments into the SRBR fund as long as it has more than 120 percent of the money actuarial analysis says it needs to pay for the benefits it ensures.
Once the fund drops below 120 percent, the payments would begin again.
Supervisors had trouble understanding why retirees were worried.
"It doesn't take one dime out of the SRBR fund," Supervisor David Couch, who sits on the KCERA board, told a room full of retirees at the Feb. 11 Kern County Board of Supervisors meeting. "I do not believe this action inhibits your paycheck."
FINGERS IN THE PIE
County retirees -- especially those who are living into their 80s and 90s and watching their pensions lose buying power -- are deeply defensive of the fund.
Retiree Janel Harvey told the board that repeated attempts to get access to the funds have retirees gunshy.
"We can't afford to have fingers in the pie that we have put away all these years," she said.
Norman Briggs, a longtime advocate for retirees who used to sit on the KCERA board, said many retirees live modestly -- and retired before the creation of the benefit packages that sometimes result in six-figure payouts and rile up taxpayers.
Briggs doesn't think supervisors are trying to grab money from the SRBR fund. But that doesn't mean, he said, the fund isn't at risk.
The SRBR pot doesn't collect money every year and could be drained if the flow that does come is shut off.
"Over time the SRBR fund will cease to exist because there won't be any money flowing into it," he said.
And once the fund is gone, the benefits go, too.
Supervisor Mike Maggard said retirees don't need to be concerned.
"Sometimes I think our retired employees are led to believe something that is not accurate because it foments fear," Maggard during last Tuesday's meeting.
And at least one county union agreed with pursuing a change in the fund.
"There is no intent to take anything away from the retirees," said Derek Robinson, president of the Kern County Fire Fighters union.
He said that everyone is ignoring the status of the main retirement fund -- where the real crisis lies.
"This is my future, too -- not just your future," he told retirees at last week's board meeting.
But supervisors -- who pushed for the legislation with a 4-1 vote -- also directed county staff to see if there wasn't some consensus that could be hammered out and support from other county unions corralled.
Supervisor Leticia Perez voted against the change because retirees, she said, hadn't had enough time to engage in the debate over the idea.
Krauter, the county legislative analyst, said the county has held one meeting with unions and a retiree. He said some fruitful ideas came out of it and there may be some grounds for a compromise.
Krauter wouldn't say what exactly that compromise would entail because supervisors hadn't yet heard about it.
But, he said, "There may be a solution."