Most Sacramento County employees have agreed to contribute more toward their pensions, long a sticking point in labor negotiations that previously left thousands of workers without a contract.
In general, unions that agreed to higher pension payments will receive bigger pay increases – 2 to 4 percent this year, tied to inflation. Unions that have held out against higher pension contributions will receive wage increases of 1 to 2 percent this year.
All but three Sacramento County bargaining units under contract have agreed to eventually pay half of the main cost of funding the county’s pension plan. County negotiators had the benefit of a 2012 state law that allows local governments to unilaterally impose higher pension contributions by 2018.
“We are feeling good about the contracts we have in place,” said Robert Bonner, the county’s labor negotiator. “They’re fair.”
State and local leaders have called for employees to pay more toward their retirement to help ensure the pension funds remain sustainable. Union leaders have questioned projections that show state and local pension funds have fallen below the amount necessary to pay ongoing benefits.
Five months ago, about 6,500 Sacramento County employees – or 62 percent of county staff – were working without a contract, and the biggest reason was a reluctance to pay higher contribution rates. Now bargaining units representing just over 1,000 employees – or 11 percent of staff – are without a contract.
The agreements call for progressively increasing pension payments starting this year. Employees will by the end of 2017 have to pay half of the plan’s “normal cost” – the amount needed each year to cover the cost of retirements beyond investment returns. Employers still have to make regular payments for the plan’s unfunded liabilities.
Sacramento County officials could not provide an estimate of how much the county will save with the pension changes. The county expects to pay $372 million to the pension plan this year.
Marcia Fritz, a Citrus Heights accountant who advocates for higher employee pension contributions, said savings from the county agreements will be “very significant” – tens of millions of dollars annually. “They should have done this a long time ago,” she said.
Gov. Jerry Brown signed the Public Employee Pension Reform Act of 2012 in an attempt to reduce the rapidly rising cost of state and local government retirement plans. A key goal is to get employees and employers to equally share the cost of the plans.
The law gives localities until 2018 to negotiate higher payments with employee groups. After that point, local governments can unilaterally impose higher rates, though the increase depends on how much employees currently pay. Under the formula, the amount Sacramento County can force most employees to pay represents less than half of pension costs.
With just over three years left before the county can impose higher rates, some unions decided to roll the dice and see if they could get a better deal later. Unions representing welfare employees, clerical workers and nurses rejected offers that required higher pension payments.
They opted for shorter-term agreements that will expire before the state law gives the county the authority to impose higher contribution rates.
Ted Somera, executive director of United Public Employees Local 1, said the union had little confidence in the county’s projected pension costs for welfare workers. He said the workers were also unsatisfied with the county’s failure to address difficult working conditions, including high caseloads.
On the other hand, another bargaining unit he represents, clerical workers, agreed to pay higher pension contributions. Those workers make less money than those in his welfare employee bargaining unit and were more inclined to take advantage of the pay increase that came with the higher pension contribution, he said.