County Union Leaders Back Pension Board

Officials who are pressing for creation of a new board to oversee the $1.5-billion Orange County employee retirement fund are engaged in a heavy-handed effort to seize money that does not belong to them, county labor leaders said Friday.

“The county has been trying to get ahold of that money for years,” said Tim Miller, president of Service Employees International Union Local 787, which represents about 600 county blue-collar workers. “The retirement board has fought hard to stop them, so now the county is attacking the retirement board.”

Robert J. McLeod, president of the Assn. of Orange County Deputy Sheriffs, noted that calls for a new board come despite evidence that the current fund managers have invested the money wisely, earning higher returns last year than any other county pension fund.

“It does seem curious that (critics) seem to say they need more experienced investors when (the retirement board appears) to be doing very well on their investments,” McLeod said.

Miller, McLeod, other labor leaders, members of the retirement board and some county supervisors are wary of a proposal to create a new board of investment.

The new investment board would wrest control of the Orange County Employees Retirement System away from the embattled retirement board, which is under fire for its travel expenses.

Those expenses have grown considerably in recent years. A 26-day trip to Europe in April cost more than $15,000. Subsequent publicity about $5,000 in personal expenses from that trip, which were eventually rejected by the county auditor-controller, fueled demands for a new travel policy and creation of the new investment panel.

But employee representatives and retirement board members said the travel debate is a smoke screen intended to obscure the real battle raging over the pension fund’s $200-million surplus.

The county government and retirement board are locked in a bitter and protracted negotiation for that money. The county maintains that the surplus should be used to offset future costs in the retirement system, while the retirement board will only agree to reduce the reserve in return for other benefits from the county.

“The county wants something for nothing,” said Robert Thomas, a member of the retirement board and a former county administrative officer. “We’re not prepared to give them something for nothing.”

At stake: about $15 million in annual county payments to the retirement system. And while the county wants that money to help fund government services--which are desperate for aid in the face of a projected $65.3-million shortfall next year--the pension board says it belongs to county workers and is needed to safeguard their retirement investments.

What particularly rankles some retirement board members and union leaders, however, is their perception that county officials have taken advantage of the controversy over the retirement board’s recent travels to fuel public sentiment against the panel. That might pave the way for a new investment board, and the county supervisors could then take up negotiations with that group instead.

In fact, that idea has been bandied about the county bureaucracy for months.

In letter written on April 22--while retirement board members still were touring Europe--county Auditor-Controller Steven E. Lewis suggested that unless the retirement board agreed to “an extremely favorable” arrangement on the surplus issue, the supervisors should “attempt to gain more control over the rate-setting process by implementing (their) right to form a separate Retirement Investment Board.”

The combination of that advice and the furor over the retirement board’s travel causes some observers to question the county’s motives and tactics.

Assistant County Administrative Officer Murry Cable, however, defended the county’s efforts to reduce the pension fund surplus and said they were not related to the travel issue.

“The surplus of $200 million does not serve the county well,” he said. “The retirement board has a responsibility not only to the retirees . . . but to the employer and his contributions.”

As the county and retirement board jockey for position in the high-stakes surplus negotiation, employee representatives are watching intently from the sidelines. Any attempt by the county to redirect the surplus--either through negotiations or by creating an investment board--is likely to bring a ringing condemnation from employee organizations.

Many of those organizations are now in contract talks with the county. The retirement board issue is not a subject of those negotiations, but if county officials move to assert more control over the pension fund, it could provoke significant worker backlash, union officials said.