Posted by Peter Carpenter, a resident of the Atherton: Lindenwood neighborhood, on May 9, 2010 at 1:41 pm
Here is what Solano County did ( and the Fire District did something quite similar):
County's solid future not by accident
Published By Times Herald
Posted: 05/08/2010 01:01:40 AM PDT
Solano County has sound fiscal managers and a responsible Board of Supervisors, past and present, which have taken prudent measures to ensure solvency of the county in this unprecedented recession. In the mid 2000s, when the stock market and our local economy were booming, we wisely saved money to use when the economic cycle turned. We knew it would; it always does.
In December 2009, the county went before the rating agencies (Moody's and Standard & Poor's) as part of a cost-saving refinancing. The county finances, along with our plans for maintaining services, were reviewed in detail. Due to our strong management team and sound fiscal policies, the county's ratings were affirmed by both rating agencies, AAA by S&P and A2 by Moody's. This affirmation is unprecedented among California municipalities in this recession. Here are three specific programs the team implemented.
Pension liability management
On April 10, the Sacramento Bee published a pension meter map of California counties. Solano County was rated in the best category with a funding level of 95 percent. This rating of "best" did not happen by accident; it was the result of prudent fiscal planning.
A Pension Oversight Committee oversees the efficient management of the county's pension liability. In 2004 and 2005 the county issued Pension Obligation Bonds to close an unfunded liability caused by the stock market pullback in 2002. The county could have paid CalPERS, the state-run retirement fund, to finance this liability. Instead, the county issued its own bonds and eliminated the CalPERS liability and saved taxpayers more than 2 percent.
A fund was established so the money saved could be used to pay off the bonds and not be spent on other expenses. $50 million of these pension bonds have been paid off ahead of schedule, realizing a significant savings to taxpayers and reducing our overall liability by one-third. Additionally, for several years the county has prepaid its annual CalPERS obligation and realized another 3 percent savings.
Retirement plans for municipalities in the state have been in the news lately, focusing on a few sensational cases. The tone of the stories would lead one to believe county workers are making a fortune in retirement. Allow me to shed some clarity on this issue: CalPERS administers retirement plans for more than 1.6 million active and retired government and public school employees. The average CalPERS pension is $25,000 per year.
Despite the proactive steps we have taken to manage these liabilities, the expense of the pension system is too great to maintain as is. The cost per employee must be reduced. The board continues to support staff efforts while we work to reduce our pension and benefits costs going forward.
In the late 1990s, county leadership realized we were not prepared for the next recession and began to build reserves. Learning from the Katrina disaster, the county modified its reserve policy to keep a minimum of $20 million in reserve at all times. Reserves peaked at $60 million before the current recession hit. It is this financial capacity that enables the supervisors to:
* Sustain the service levels it has to date.
* Minimize layoffs and avoid the wholesale program elimination that neighboring counties have experienced.
* Fund local priorities, such as the Williamson Act subventions that protect our $1 billion agriculture industry.
* Established a building maintenance fund to ensure our infrastructure investments could be maintained in a tough economy.
In December 2009, the supervisors took aggressive action to reduce the projected General Fund structural deficit by half in order to ensure solvency in future years. The deficit is calculated by comparing expected revenues to expected expenses. Additionally, the board directed staff to further reduce the remaining deficit in the coming year. These early and decisive actions have positioned Solano County to be proactive in selectively maintaining our most critical programs.
The county clearly has challenges ahead. Property tax revenue, sales tax revenue, and revenue from the state continue to decline. The challenge we now face is how we downsize county government to fall in line with the revenue stream and protect our most important services in the process.
Fortunately, we have reserves to protect core services while we do this over the next few years.
Solano County Treasurer, Tax Collector, County Clerk