Supervisors Urged to Contribute More to Pension Fund : Finances: With returns down, the county Board of Retirement seeks an additional $5.5 million and new investment strategy.

To offset low returns on investment bonds, the county Board of Retirement agreed Monday to recommend an additional $5.5-million payment to Ventura County’s employee pension fund.

The retirement board proposed that the County Board of Supervisors increase its annual contribution to the retirement system--which has paid generous bonuses to retirees in recent good years--from $26 million to $31.5 million next fiscal year.

The supervisors would make the payment out of the county’s general fund, which is used for a variety of basic services. A vote is expected in March.

The retirement board also agreed Monday to adopt a “catch-up” investment strategy that calls for buying more high-yield international stocks and bonds. Officials believe that will bring a better return over the next 14 years and eliminate a $207-million shortfall in that period.

County Supervisor Frank Schillo, set to be appointed the supervisors’ representative on the retirement board today, said the county has little choice but to approve the extra $5.5 million to meet its pension obligations.

“At this point in time I don’t see how we can get away from doing that if we’re going to properly fund the plan,” said Schillo, who attended Monday’s meeting but did not vote.

Schillo, a financial consultant who specializes in retirement funds, said the county should never have paid retiree bonuses because there was no guarantee of continued high returns on pension investments. Between 1990 and 1994, county retirees received $20.4 million beyond their guaranteed pensions. The bonuses were abolished last spring as returns dropped.

“That should never have been done,” Schillo said. “If they hadn’t done that, we’d still have some money sitting there.”

Treasurer-Tax Collector Harold Pittman, who oversees the county’s retirement program, said that the bonuses were paid because the county pension returns doubled in recent years to as much as 15%.

“In hindsight, I don’t think we should have--at least not until (the county pension program) was fully funded,” Pittman said. “But when . . . you’re getting 15% you tend to want to be a little generous.”

Rick A. Roeder, whose firm serves as the county’s actuary, said the county had a $46.3-million shortfall in its expected return in 1994 because of a recession-battered government and corporate bond market. Of the retirement system’s $900-million portfolio, 53% is in stocks, 42% in bonds and 5% in real estate.

“It was one of the worst years for the bond market in the 20th Century,” Roeder said.

The county also suffered a $700,000 shortfall last year because of lower-than-expected employee turnover. Employees with less than five years of service lose the county contribution to their retirement.

In a move to increase investment returns, the board adopted a consultant’s recommendation to invest more in international markets, rather than limiting itself primarily to U.S. markets.

Some members of the retirement board expressed concern about the volatility of some international markets, like Mexico’s, which has seen a massive devaluation in the peso in recent weeks.

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But Lawrence Davanzo, a consultant hired to advise the board on its investment policies, said that while international investments may pose more risk, they have performed well in recent years and offer the best opportunity to increase long-term investment returns.

Davanzo said that the county could provide some measure of protection by diversifying its global investments and by gradually investing in foreign markets.

“The way you deal with this is not to put all of your money in Mexico,” he said.

Schillo said he supported the new investment strategy, which is expected to increase the county’s rate of return on investments from 8.87% to 9.42% over the next 20 years.

“I think the new investment strategy is acceptable in the long run,” he said. But he added that he still has some questions about when the county should begin shifting some money from domestic to international markets.