Key federal legislation that could lower Orange County’s unfunded pension liabilities by allowing current employees to opt in to a lower benefit tier has been facing a strong challenge from one of the nation’s largest employees unions.
On Tuesday just outside the City Council meeting in Orange, Rep. Loretta Sanchez, D-Santa Ana, said the positions of national unions such as the American Federation of State, County and Municipal Employees are a key hurdle in moving forward with House Resolution 205, which would resolve tax implications for existing employees who opt in to a lower benefit as part of the “hybrid plan.”
“They haven’t been real thrilled with that bill,” said Sanchez, adding that she hopes the federation drops its opposition.
Meanwhile, the federation, which represents about 1,200 social service eligibility workers in Orange County, declared the changes would adversely affect rank-and-file workers, who already face the lowest retirement packages among county labor groups.
Sandra Fox, president of the union's Local 2076, said that if workers opted in to that pension plan, they’d have a lower benefit formula than Social Security's.
“We are the bargaining unit that has the lowest retirement,” Fox said Tuesday evening. “We would lose even more.”
“The way that it stands right now, I don’t see us supporting it,” she added, pointing out that the union is fighting the bill at the federal level.
The Orange County Employees Association or OCEA, which is the county’s largest labor union, and the county Board of Supervisors see it differently and have supported the hybrid plan as a reasonable approach to dealing with the county’s growing unfunded liabilities.
Sanchez emphasized that it’s important to move forward for the sake of the county's finances, citing recent municipal bankruptcies.
“We don’t want to end up like Detroit,” said Sanchez, who added that she's been meeting with the federation as part of her efforts to pass the bill.
This all comes against a backdrop of significant pressure on public pension plans, including Orange County’s, where the unfunded liability has soared from just over $1 billion in 2004 to more than $5 billion today.
Over the last decade, a combination of benefit increases, market losses and changes in actuarial assumptions have all contributed to the skyrocketing of unfunded liabilities.
Many Republican leaders, like county Supervisor John Moorlach, have argued for an aggressive approach to paying down that liability — in some cases pushing to shorten some amortization schedules from a 30-year payoff down to 15-years.
Others, including city officials like Stanton’s Republican Mayor Dave Shawver and many labor groups, such as OCEA, the county Professional Firefighters Association and the Association of Orange County Deputy Sheriffs, support speedier amortizations, such as 25 years. But a 15-year goal is too aggressive, they insist.
That debate exploded this summer with county Treasurer-Tax Collector Shari Freidenrich casting the deciding vote on the issue, summing up the aggressive amortization plan supported by supervisors' appointees to the local retirement board as “too dramatic of a step.”
Beyond the issue of expanding pension liabilities, there seems to be consensus among OCEA and Moorlach that workers should have an option to opt into a lower benefit tier.
Typically, younger workers choose lower retirement benefits in order to get higher take-home pay while working.
The federation, which is one of America's largest unions with 1.5 million members, is on the other side of the issue.
It has argued that the 401(k) approach of the hybrid plan puts the workers’ financial futures at risk.
“Let’s say you do the wrong investment. What happens? You lose everything,” said Fox. “Again, it’s the county employee that has dedicated their whole life to servicing the public.”
Even with bipartisan support from Rep. John Campbell, R-Irvine, and Rep. Ed Royce, R-Brea, the bill faces an uphill battle in Congress.
Sanchez was in Orange on Tuesday as part of her regular Congressional updates throughout town.
In her presentation, she mentioned bills she’s cosponsoring to revise requirements for restaurants to disclose calorie counts and help science and technology graduates who are on student visas gain permanent residency while they're working.
Sanchez also said she'll host an informational workshop for veterans at Santa Ana College on Sept. 27 to help them understand their GI benefits, which include support for college tuition and books.