Sacramento Sheriff's Department retirement deal goes to union, supervisors

Robert Lewis
Sacramento Bee
Aug 10, 2010

Union officials were counting votes through the night on a deal expected to save 85 Sacramento County Sheriff's Department jobs this year.

If members of the Sacramento County Deputy Sheriff's Association ratified the deal – as expected – the Board of Supervisors will vote as early as today on the changes, which include a plan to boost law enforcement managers' pensions in an effort to encourage early retirements.

The county's own retirement system has raised questions about the legality of the county's approach – specifically compliance with a law to ensure due diligence and transparency.

Local governments are required to have an actuary study the long-term costs of any pension benefit increases and to release the results of such a study at a public meeting two weeks before approving the changes.

The county, however, didn't publicly release an actuarial analysis until 5:30 p.m. Monday.

"We just urged caution in considering this. It arguably is a situation that required an actuarial study be conducted under the law," said Richard Stensrud, the Sacramento County Employees' Retirement System's chief executive officer.

Stensrud was careful to say SCERS officials haven't taken a formal position on whether the county is breaking the law. SCERS, which contacted the county with its concerns two weeks ago, simply wanted the county to consider the issue, Stensrud said.

The county, however, has taken a somewhat nuanced approach to the question, arguing that the changes don't fall under that section of the law.

The issue surrounds a proposal to allow members of the Law Enforcement Managers' Association who agree to retire in the next month to cash out up to 200 hours of unused vacation time and count the money toward their final salary for the purpose of calculating their pension. This would essentially boost some managers' pensions by about 5.7 percent a year. The county expects as many as 20 managers – including 14 from the Sheriff's Department – would take the deal.

County Counsel Robert Ryan said the changes represent a compensation change and not a retirement benefit change, which is why the county didn't need to release the actuary's findings sooner. The county isn't changing the pension calculation; it would be changing the employees' final compensation, he added.

"SCERS' interpretation appears to be based on the reasoning that such a payment increases retirement payments so therefore is a retirement benefit. However, this reasoning would transform any Board action to increase employee compensation as a retirement benefit which would be subject to the requirements" of an actuarial analysis, Ryan wrote in an e-mail to The Bee.

In the county, 61 law enforcement managers would be eligible to take the early retirement incentive.

The Segal Company performed an actuarial analysis to estimate what the costs would be under several different scenarios. If all 61 managers took the incentive and cashed out the full 200 hours of time, it would add about $13 million in unfunded liability to the retirement system, according to the analysis. If half as many took the incentive, it would add $9.3 million in unfunded liability.

Interim County Executive Steve Szalay said the cost would likely be less. Only 20 managers with an average of 120 hours of vacation time to cash out will likely take the incentive, Szalay said. That could bring the cost down to around $6 million, he said Monday evening.

While there will be a cost for the incentive, another part of the plan could save significantly more, Szalay has said. The plan on the table would raise the retirement age for new Sheriff's Department hires.

Deputies can currently retire at 50 and get a pension based on the average of their three highest years of compensation multiplied by their years of service. New hires wouldn't be eligible to retire with 3 percent until they turn 55. The pension formula for non-sworn personnel covered by the deputies' union would go from 2 percent at 55.5 to 2 percent at age 60.

It's unclear when the changes would take effect. Because of complex pension rules, the county would need all public safety unions – including those representing probation – to agree to create a new pension tier. Otherwise, it would have to push for enabling state legislation, which could take up to a year.

There is no actuarial analysis of this plan, but Szalay projected that such a change could save more than $100 million over the next 25 years.

The plan also calls for deputies to begin paying more into the retirement system. Deputies currently pay around 6 percent of their salary to the system. That would go to about 9 or 10 percent this year and top off at almost 13 percent next year.

To help offset the cost, the proposal includes a 3.8 percent raise for sworn officers. On top of an expected cost-of-living raise for next year, that could bring their 2011-12 raise to between 5.8 percent and 8.8 percent.

The plan also includes an early retirement incentive for senior deputies. Up to 40 members of the deputy sheriff's association who agree to retire now would be eligible to cash out up to half their unused sick leave, up to 1,000 hours.

Officials say the early retirement incentives for both managers and deputies are fully funded: The $1.2 million price tag of payouts to deputies will be offset by a $234,000 savings in unemployment insurance costs – money the county won't need to pay if people leave willingly as opposed to through layoffs – and a $982,150 savings from suspending the county's contribution into the Retiree Health Savings Program for a year.

The cost of the increased pensions for managers has been funded largely through increased contributions managers and the county have been making for years, officials said. Savings from keeping the positions vacant and from not paying into unemployment insurance also will help, they said.

Under the proposal, Sheriff John McGinness would be able to rely on retired deputies and other on-call staff to fill staffing holes. McGinness has often argued that such workers are cheaper because the county doesn't pay them benefits.

The plan has drawn the protest of taxpayer groups and the District Attorney Jan Scully. Some advocates have railed against the idea of higher pensions for top officials.

Scully has balked at the county's guarantee of no Sheriff's Department layoffs should the plan pass. The county shouldn't make such a promise until it knows what impact the state budget will have on the county, she said.

County officials say the proposal would save $3.72 million this year, including $2.9 million for the general fund, and would save another $2 million next year, including $1.56 million for the general fund.