More Californians than ever before are earning $100,000 or more from public pensions, according to an analysis by government watchdog Transparent California. And in 2018, Kern County led the charge in one measure by welcoming the highest proportion of public service employees into the six-figure range of any pension fund statewide.
While Transparent California sees the increases as potential threats to public services and tax hikes, the local county pension administrator is not alarmed.
“$100,000 is an arbitrary number,” said Dominic Brown, executive director of Kern County Employees Retirement Association. “I don’t see that as throwing up any red flags.”
In 2018, KCERA experienced a 21 percent increase in pensioners receiving $100,000 or more compared to the previous year. That narrowly beat out the Los Angeles Fire and Police Employee’s Pension at 20 percent and the Los Angeles County Pension and Fresno County Employee’s Retirement Association, both at 19 percent, according to Transparent California.
In 2017, Kern County experienced a 12 percent increase.
While thousands of retirees in Los Angeles draw more than $100,000 from public pensions compared to Kern County’s 525 in 2018, Transparent California’s analysis only took into consideration the ratio of newly-minted six figure earners in 2018.
“It’s just another way to highlight the facts, which are, quite frankly, that the system is very rich and very generous, and that’s why costs are going up by so much,” said Transparent California Executive Director Robert Fellner.
Across the state, 79,325 pensioners draw more than $100,000, which is up 85 percent since 2013, according to the analysis.
If costs continue to go up, Fellner said working class citizens who will never earn a pension that generous will be forced to pay higher taxes while potentially getting less in return.
Pensions are funded through investment returns, and employer and employee contributions. Each year, beneficiaries can receive pension increases through cost of living adjustments. Workers entering a pension program typically earn less through their salaries than other workers, with the expectation that they will receive more in their retirement.
Sometimes – as is the case in Kern County – the amount going into the system can be less than that which needs to be paid out, creating an unfunded liability.
KCERA has approximately $6.4 billion in total liabilities, with $4.4 billion in assets, according to Brown.
Brown said he was not concerned about the overall health of the plan, adding that projections indicated investment returns would return it to being fully funded by 2035.
“Over the next 18 years or so, we catch up and all that liability gets paid,” Brown said, adding that 19 other counties had the same plan as Kern County. “We are all, more or less, in the exact same boat."
KCERA projects currently estimate a long term rate of return at 7.25 percent. If that is not realized - say, from a market downturn - KCERA will need to readjust its projections.
With Kern County recently emerging from a fiscal crisis, leaders are under pressure to approve raises for various employees. Fellner cautions against such actions.
"When things are good, (politicians) tend to give the money away with raises and things like that," he said. "You should be using that surplus to pay down your debt because if you wait until things collapse, that’s precisely when you don’t’ have the money."