Why Were Ventura County Residents Blocked From Voting on Pension Reform in the Midterm Elections?
"The taxpayers bear a large burden…for the government employees' pension and these pensions are much more generous than is available to them," says Richard Thomson, president of the Ventura County Taxpayers Association (VCTA). "The question you have to ask is what's so special about government employees that they shouldn't have to assume some of their own risk—like the taxpayer—for their retirement."
On Tuesday, voters across the county will venture to polling stations for the midterm elections. In Ventura County, California, residents will be able to have their say on a variety of local issues, but there is one initiative they won't be able to cast their ballot for—that measure is pension reform.
Like so many retirement systems across the country, Ventura has seen it's pension fund go from having a healthy surplus to being over a billion dollars in debt. To avoid having their county become the next Stockton or Detroit, the Ventura County Taxpayers Association crafted a reform measure that would move the county from a defined benefit to a defined contribution system.
But shortly after it was approved to appear on the ballot, a local judge preemptively ruled the measure illegal and ordered it stricken from the 2014 election—thus ending Ventura's hopes to change their costly pension system.
The roots of Ventura's failed attempt at pension reform were planted in 1947 when residents elected to create the Venture County Employees Retirement Association (VCERA). After the Great Depression, states thought it beneficial to establish retirement systems that could provide aging workers with modest benefits when they could no longer work.
In California, a 1937 law gave counties a choice—they could become part of the statewide retirement system or create their own. Twenty counties, including Ventura, chose the latter and became known as '37 Act counties. This designation is important because if Ventura could elect change, it could provide a blueprint for other counties to enact reform without having to go through the arduous legislative process in Sacramento which often stalls because of union pressure to squash any form of pension reform.
According to the judge's ruling, even though voters elected to create a pension fund decades ago, the law provides them no way to exit the system through a vote. Reformers would have to either repeal or amend the law through state legislation to change their costly pension programs.
The decision was a setback for the VCTA, who had hoped a midterm victory could expedite change to VCERA's growing mountain of debt. In 1999, pension payments accounted for just one percent of the total budget—today that number is 17 percent. As retirements eat up a bigger portion of the budget, the amount residents have had to kick in to cover pension obligations has also increased.
Taxpayers pay $153 million per year to the pension system—that's triple the number they paid out over a decade ago. In the next five years, that number is expected to climb to $226 million.
Some of the rise in costs can be attributed to demographics. Retirees are living longer and drawing more in pension payments. Unrealistic investment targets have also hampered growth in the retirement system. While Ventura assumes the standard 7.75 percent return on retirement investments, the county has seen just a 5.82 percent return in the last five years.
In addition to these factors, the county also has the distinction of having some of the highest retirement benefits in the state—thanks to a practice known as spiking—in which retirees can manipulate their final pay with supplemental benefits to boost their pensions.
A 1997 state supreme court ruling known as "The Ventura Decision" upheld this practice which legitimized pension spiking throughout the state. A recent Los Angeles Times study found that 84% of Ventura retirees receiving more than $100,000 a year in pension benefits are getting more than they did on the job.
"When you look at compensation and pensions…we're right up there if not higher than anybody else," states Bill Wilson, a member of the VCTA who has also served on the county retirement board for over 16 years.
Under the defined benefit model, the government worker contributes just a small fraction of their payroll toward the retirement fund. According to a 2014 actuarial report done by Segal Counsulting, Ventura county workers contribute 7.20% percent of their paycheck, while public safety employees contribute 15.93 percent. The taxpayers match those contributions and pick up the payments for any debt that has accrued.
The same Segal actuarial report spells out average county worker benefits. After 35 years of service, the average county employee in Ventura with an $85,000 salary could expect to retire with $74,375 in annual benefits on top of their social security and 401(k) pay. The average public safety employee making $125,000 salary can expect to walk away with an annual pension of a $101,250 after 30 years of service.
The reform would have changed this structure by enacting a defined contribution plan whereby the county would contribute four percent for general county employees and 11 percent for public safety workers. The measure would have only applied to new employees hired after July 2015. The Reason Foundation—which publishes Reason TV—provided analysis of the reform for the VCTA and estimated that the measure would save the county $460 million over the next 15 years and would reduce pension liabilities by $1.8 billion.
While the measure was wildly popular with local residents, labor groups vehemently opposed reform. They turned out in large numbers to county board meetings to voice their opposition and even showed up at signature drives to intimidate people from signing the petition to place reform on the ballot.
Though the measure won't appear on this year's ballot, the VCTA will continue to push for statewide reform. Growing public support for reform and recent court rulings that may allow cities like Stockton and Detroit to restructure their pension debt could be the tipping point necessary to bring about change.
"Once people realize what is at stake here, they're going to support it," says Wilson.
Approximately 11 minutes.
Produced by Alexis Garcia. Camera by Garcia, Paul Detrick, and Alex Manning. Music by MobyGratis, Incompetech, and Free Music Archive.org.
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