The Ventura County Grand Jury wants retirement reform, but it’s not an easy fix.

Its June 10 report, Ventura County Pension: An Uncontrollable Cost, is a microcosm of California county pension woes: almost $1 billion lost in fund assets in calendar year 2008, projected increases of over $100 million in costs by 2013, portfolio returns way below the 8 percent actuarial assumed earnings rate.

The Grand Jury recommended changes to the way the County manages its pension fund, including voter approval of retirement benefit increases and a study of private sector retirement plans for new employees. Also at issue is how the Ventura County Employees’ Retirement Association allocates “excess earnings,” a practice the County Executive Officer has termed “a legal and accounting anomaly that is not consistent with sound funding practices.”

The Grand Jury required the Board of Supervisors and VCERA, the agency that manages the plan for more than 13,000 current and retired employees, to submit written responses, but its recommendations are not legally binding.

“What we do is based on the State Penal Code,” said Grand Jury Foreman Henry Kelley. “We have no effect of law on whatever agency we make recommendations to.” He said agencies can agree, disagree — and refuse the recommendations — or request additional time for review.

“Don’t promise something you don’t have,” is how Supervisor Peter Foy views the County’s current pension plan troubles. Foy concurs with the Grand Jury that voter approval is needed for any future benefits increases; he’s drafting a proposition he plans to submit to the Board of Supervisors for approval in 2-3 weeks.

“When you get into defined benefit pensions, you are putting huge debt burdens on the public,” said Foy. “We’ve seen these pensions get so far out of control and out of the realm of our ability to pay for them – the market just exaggerated the problem – what I look at is at that point we need to have the public who’s going to pay these costs with tax increases – they should have the right to vote on any increases.”

Foy favors adding a benefit tier for new employees; he’s open to a defined contribution plan as well. His goal is a more predictable cost outcome. “We’ll give you the money we have at the time we have it,” he said.

Supervisor John Zaragoza believes any change to the existing pension plan needs further study. “I think our defined benefit plan is working. We have some very highly qualified and dedicated public employees. We need to retain those employees with good benefits, and I would hate to see our public employees being compromised.”

The mandate to contain pension costs is a county-wide effort, Zaragoza said. “With the financial crisis we have to look at all aspects of the different programs and services that we provide,” he said. “The most important aspect of the current pension debate is public safety.”

In addition to its current Tier 1, Tier 2 and Safety Plan options, Ventura also has a Tier 3 option that isn’t being used, said Chief Assistant County Counsel Leroy Smith.

“We actually have in the statute another plan that’s available only for the County of Ventura — counties can go to their legislators to get special plans for just that county — the Tier 3 plan – created in the 1980s, but we never implemented that plan.”

Smith said the Tier 3 plan has a phased-in percentage on age that goes beyond 65. “You could go to age 67, 68 and get a higher percentage, and some of the contributions are lower. It pays less unless you are older in the system.”

Creation of a tier for new employees requires legislative approval, said Smith, but there are other factors in its acceptance.

“If the Legislature created a plan, we’d probably still have to negotiate with the unions before we exercise that option. I’m not sure the County could unilaterally select the options before bargaining with the unions.”

As for a straight defined contribution plan, Smith said counties can do that already. “If you wanted to not have a defined benefit plan at all you could do that already by discontinuing defined benefit pension plans. In theory counties would not have to participate in the ’37 Act or CalPERS, but there’s more involved because everyone in the ‘37 Act plan is vested; the issue is can you discontinue it as to all future employees?”

Two of the Grand Jury’s recommendations concern “excess earnings” and changes to the County Employees Retirement Law of 1937.

The report asks VCERA to retain “excess earnings” when the pension plan is funded at less than 90 percent; it also requires both VCERA and the Board of Supervisors to prepare legislation to change the “excess earnings” provision in the ’37 Act so that investment income in high-performance years must first be used to compensate for years when investments provide inadequate returns.

The Board of Supervisors responded that legislation isn’t necessary to accomplish what the Grand Jury recommends; why not eliminate VCERA’s authority to exceed retirement benefits granted by the BOS?

In its response, the VCERA opposed retaining “excess earnings” and declined to participate in legislation that it believes would, if enacted, favor Ventura County’s interests above those of plan participants.

Tim Thonis, retirement administrator for VCERA, cites the ’37 Act as the basis for VCERA’s position. “It’s defined in the Government Code, and the Board of Retirement will continue to exercise its fiduciary duty in analyzing or reviewing any excess earnings that the VCERA may have in the future,” he said.

Foy is skeptical about “excess earnings” because investment returns are so inconsistent. “We try to pick a return, and on our return of 8 percent that we pick we get 12-15 percent per year, and some years we get less than that. We’re always behind,” he said.

If there are any extra earnings, Foy believes they should be left in the program to offset years when it doesn’t make additional income.

Zaragoza favors cautious use of “excess earnings” but only when the funds are available.

“When we do have good times, those monies should be set aside to a certain amount, like a reserve account until we get to a certain amount,” he said.

“I think if the savings is reasonable — like any agency that has reserves — anything beyond can be used for additional benefits or additional programs. But you have to have a reasonable amount of dollars in reserve before you allocate any to benefits.”

Margaret T. Simpson is a Southern California freelance journalist who writes on employment, business, education and healthcare.