Union, O.C. Have Tentative Contract

Orange County officials appear ready to significantly boost the pensions of longtime employees as both sides complete a labor agreement for employees who have worked without a contract for nearly a month.

The tentative deal with the Orange County Employees Assn. includes a pay freeze for three years but calls for an increase in retirement benefits that will allow a few veteran employees to retire with pensions equal to 100% of their final salaries, sources familiar with the negotiations said Thursday.

County officials expect the increased retirement benefits to add $300 million in liability to the already underfunded county retirement system.

But the tentative agreement calls for employees to make it up to the county in the next 30 years by committing them to employee contributions and to salary and benefit concessions.

“We think it’s an agreement that is very good for the county and will also serve the interests of our members,” said Nick Berardino, general manager of the association that represents 13,500 employees.

Berardino declined to discuss details of the contract because it has not yet been submitted to workers to review. Employees are scheduled to begin voting on the contract Monday.

County officials also would not discuss the tentative agreement because it has not yet been approved by the union or Board of Supervisors.

Under the proposed contract, employees with more than 37 years of county service could receive pensions equal to 100% of their final salaries. Some county officials said the deal is good for both sides because employees will receive an increased benefit at no additional cost to the county. Increased pensions, they say, will be funded over time at county workers’ expense.

Orange County Treasurer John M.W. Moorlach, who has criticized county officials for agreeing to a generous pension increase for sheriff’s deputies, said he’s concerned that the new labor contract could put the county at financial risk.

The county retirement system is already underfunded by more than $1 billion, and adding to that -- even with a promise of repayment by workers -- is worrisome, Moorlach said.

He said it is difficult to gauge the future costs of pension systems, so there’s no guarantee that employee contributions will make up for the increase.

The county retirement system invests some of its assets in stocks and bonds. The cost of the increased retirement benefits was reached assuming a 7.5% return for the system’s assets.

“We’re in dire financial straits and you’re asking for something on the presumption it will all pencil out. What will you do if it doesn’t?” Moorlach said. “There’s a lot of rosy predictions. My fear is: what if they do not materialize? What do you do? File for Chapter 9 [bankruptcy] again?”

Orange County declared bankruptcy in 1994 after the former treasurer’s investment strategy backfired, creating more than $1.6 billion in losses.

The proposed contract would allow employees to begin retiring with the new benefits in July 2005.

The employees would make cash contributions to the retirement system to make up for the increased retirement liability. Employees also would make additional contributions for medical insurance as part of the contract.

Moorlach said he hopes that the Board of Supervisors researches the potential risks carefully before approving the contract.

“The board really has to be extremely cautious and they have to step back and say, ‘What consequences will this decision have for the next 30 years?’ ” Moorlach said.