Pen­sion costs plague Fair­fax bud­get

OF­FI­CIALS WEIGH CUTS, EL­I­GI­BIL­ITY AGE HIKE Since 2010, county re­tire­ment-plan pay­outs dou­bled

The Washington Post Sunday - - METRO - BY AN­TO­NIO OLIVO

With pen­sion costs eat­ing up a grow­ing pro­por­tion of Fair­fax County ex­penses, of­fi­cials are weigh­ing whether to phase out a unique pro­gram that pays a small ad­di­tional stipend to em­ploy­ees who keep work­ing af­ter reach­ing re­tire­ment age.

Board of Su­per­vi­sors Chair­man Sharon Bulova (D) said the county also may ex­plore rais­ing the min­i­mum re­tire­ment age for new em­ploy­ees to 60, af­ter boost­ing it from 50 to 55 four years ago.

“I don’t see us go­ing back on our com­mit­ment to em­ploy­ees who came to the county with the ex­pec­ta­tion that would be one of their ben­e­fits, but we are look­ing at whether or not we should do some­thing dif­fer­ent for new em­ploy­ees,” Bulova said.

The pos­si­ble changes to the county’s re­tire­ment sys­tem are in the early phases of dis­cus­sion, with bud­get of­fice em­ploy­ees study­ing po­ten­tial sav­ings. Lo­cal unions have vowed to op­pose any changes.

Since 2010, pen­sion ex­penses in Vir­ginia’s largest ju­ris­dic­tion have nearly dou­bled to $219.5 mil­lion at a time when the stub­bornly luke­warm lo­cal econ­omy has kept rev­enue down. Na­tion­wide, govern­ment pen­sion-fund costs have risen as well, the re­sult of a grow­ing pop­u­la­tion of re­tirees who are liv­ing longer, as well as weak in­vest­ment re­turns on Wall Street af­ter the 2008 Great Re­ces­sion.

In the coun­try’s 50 largest lo­cal gov­ern­ments — in­clud­ing Fair­fax County — pen­sion costs to­taled $17.6 bil­lion in fis­cal 2015, up 137 per­cent from 2005, ac­cord­ing to an Oc­to­ber re­port by Moody’s In­vestors Ser­vice. An­a­lysts with the Wall Street rat­ings agency say costs are likely to con­tinue ris­ing over the next two years in what is ex­pected to be a volatile in­vest­ment mar­ket.

Fair­fax’s three pen­sion funds cover about 31,000 cur­rent and for­mer gen­eral county em­ploy­ees, po­lice of­fi­cers, fire­fight­ers and other uni­formed per­son­nel — up from 27,000 in 2008.

Last year, the po­lice pen­sion fund grew by 1 per­cent, af­ter in­creas­ing 20.8 per­cent in 2010; the fund for gen­eral county em­ploy­ees shrank by 0.4 per­cent, af­ter a 25.2 per­cent return six years ago; and the fund for fire­fight­ers and other uni­formed per­son­nel shrank by 0.8 per­cent, af­ter a 15.5 per­cent in­crease in 2010.

As a re­sult, pen­sion con­tribu-

the county makes to meet its re­tire­ment plan obli­ga­tions to em­ploy­ees are tak­ing up a larger share of the gen­eral-fund bud­get: 6.3 per­cent of over­all ex­pen­di­tures last year, com­pared with 4 per­cent in 2010.

“The re­al­ity of 2008 and the im­pact of the mar­ket can’t be un­der­stated,” said Joseph Mon­doro, the county’s bud­get di­rec­tor. “We’re still re­cov­er­ing from that.”

In 2013, county su­per­vi­sors made an ef­fort to save money by ad­just­ing pen­sion-el­i­gi­bil­ity re­quire­ments for new em­ploy­ees. Cur­rently, most county work­ers can’t re­tire un­til they are at least 55 and their age and years work­ing for the county add up to at least 85 years. Po­lice and fire­fight­ers can re­tire at age 55 or with 25 years of ser­vice. The changes, which in­cluded lim­it­ing the amount of un­used sick leave that could go to­ward cal­cu­lat­ing re­tire­ment el­i­gi­bil­ity, were pro­jected to save $11.5 mil­lion by 2027.

But with pen­sion costs still grow­ing and the county fac­ing a pro­jected $83 mil­lion bud­get short­fall af­ter years of trim­ming ser­vices and spend­ing, com­mu­nity groups are urg­ing the Board of Su­per­vi­sors to do more.

The prime tar­get right now is a re­tire­ment ben­e­fit known as the Pre-So­cial Se­cu­rity Sup­ple­ment, which last year paid about $40 mil­lion to 2,900 em­ploy­ees who con­tin­ued work­ing af­ter be­com­ing el­i­gi­ble to re­tire. The perk — adopted in the early 1970s to lure and keep the best work­ers in what was then a rapidly grow­ing county — is the only one of its kind in the re­gion.

“This is some­thing that is not left nor right nor any kind of par­ti­san is­sue,” said Jeff Bar­nett, pres­i­dent of the McLean Cit­i­zens Association, which re­cently pub­li­cized its own cal­cu­la­tions of the county’s steadily ris­ing pen­sion costs. “It’s just sim­ple math­e­mat­ics. The sta­tus quo does not seem to us to be prac­ti­cal.” Sev­eral su­per­vi­sors agree. “I def­i­nitely think that, go­ing for­ward for new em­ploy­ees, it’s an ex­tra we can’t af­ford,” Su­per­vi­sor John Cook (R-Brad­dock) said of the Pre-So­cial Se­cu­rity Sup­ple­ment.

Cook also ar­gued for chang­ing the re­tire­ment el­i­gi­bil­ity re­quire­tions ments for new em­ploy­ees so their age and years with the county govern­ment have to add up to 90 years, a stan­dard he said most county em­ploy­ees al­ready meet.

Su­per­vi­sor Pat Her­rity (RSpring­field) called the sup­ple­ment an un­nec­es­sary drain on county re­sources that keeps Fair­fax from spend­ing money needed for schools, parks and em­ployee wages. He also has been push­ing the county to adopt a “hy­brid” pen­sion sys­tem that in­cludes a less costly 401(k) re­tire­ment plan op­tion — a choice in­creas­ingly em­braced by pri­vate em­ploy­ers.

“You can’t say you’re fis­cally re­spon­si­ble if you’re not ad­dress­ing this ba­sic is­sue,” Her­rity said.

Fire De­part­ment Capt. John Niemiec, pres­i­dent of the county’s lo­cal union for fire­fight­ers and paramedics, said elim­i­nat­ing the Pre-So­cial Se­cu­rity Sup­ple­ment would keep good res­cue work­ers from stay­ing on the job longer and steer qual­i­fied applicants into other ju­ris­dic­tions.

“There is no way our union is go­ing to sit idle and let them start tak­ing away our ben­e­fits,” said Niemiec, adding that county em­ploy­ees al­ready have en­dured sev­eral years with­out sig­nif­i­cant pay raises. “Enough is enough.”

Randy Creller, who chairs the county’s Em­ployee Ad­vi­sory Coun­cil, said carv­ing into pen­sion funds, even for fu­ture em­ploy­ees, would hurt morale. “If you start tam­per­ing with that, peo­ple start mak­ing de­ci­sions over whether to stay or not stay,” he said.

Yet with tax rev­enue fail­ing to keep up with in­creas­ing de­mand for govern­ment ser­vices and Fair­fax su­per­vi­sors un­will­ing to raise prop­erty taxes af­ter in­creas­ing them last year by an av­er­age $304 per house­hold, the county is faced with hard spend­ing choices.

That com­bi­na­tion re­quires strate­gic think­ing, said Su­per­vi­sor Pene­lope A. Gross (D-Ma­son), who chairs the com­mit­tee over­see­ing county pen­sions. She has not yet taken a po­si­tion on what should be done about the es­ca­lat­ing costs.

“We’ve seen that on all the in­vest­ments that the county has, mil­lions of dol­lars in in­ter­est in­come isn’t there any­more, which has made our lives more dif­fi­cult,” Gross said. “It’s not bad news. It’s just the re­al­ity.”

“Mil­lions of dol­lars in in­ter­est in­come isn’t there any­more, which has made our lives more dif­fi­cult. It’s not bad news. It’s just the re­al­ity.” Fair­fax County Su­per­vi­sor Pene­lope A. Gross (D-Ma­son)

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