Voters Face Pension Ballot

The Orange County Board of Supervisors this week approved a ballot measure that would require voters to approve any future increases in public employee pensions.

The charter amendment will go on the Nov. 4 ballot. The measure requires a simple majority to pass.

If approved, the measure would require the Orange County Employee Retirement System to prepare an actuarial study of the cost of the proposed benefit increase and require that voters approve any pension increases other than cost of living adjustments. The amendment was sponsored by Supervisor John Moorlach.

San Francisco’s charter includes a provision requiring voter approval of pension increases, and the measure is widely credited with keeping the city from running up large unfunded pension liabilities. Its pension fund is actuarially fully funded.

Voters in San Diego, where city officials hid a $1 billion-plus pension liability from voters and investors until a pension scandal broke in late 2003, approved a similar charter amendment in 2006. 

Orange County has an accrued unfunded pension liability of $2.7 billion, according to its 2007 comprehensive annual financial report. The county board dramatically increased police pension benefits in 2001, and the county sued earlier this year to revoke the retroactive benefits. It renegotiated its employee retiree health benefits in 2006, slashing its unfunded liability to about $400 million from $1.4 billion.

Moody’s Investors Service this week affirmed the county’s Aa2 issuer credit rating, and Fitch Ratings affirmed its AA-minus on the county’s long-term lease revenue, fiscal recovery and pension debt. Standard & Poor’s upgraded the county’s issuer credit rating to AA-minus last year after Orange County addressed its retiree health liability. It affirmed the rating this week.

The county is preparing to issue $80 million of tax and revenue anticipation notes on Aug. 21.

Orange County declared the largest municipal bankruptcy in U.S. history in 1994 and still has $106.8 million of recovery bonds outstanding. It will extinguish the debt in 2017.

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