O.C. Pension Shortfall Figure Soars

The pension fund for Orange County employees is more than $2 billion short of what officials think they need to pay future retirement benefits, according to a new study that stunned county officials Friday.

The deficit is worse than expected, and county officials are considering hiring another consultant to review the findings before taking action to shore up the fund. Public pension funds are under scrutiny throughout the nation.

Bill Campbell, chairman of the Board of Supervisors, said the news surprised him. “This is a big change and far from anything we’ve been told about the retirement system,” he said.

County Treasurer-Tax Collector John M. W. Moorlach said the worsening pension outlook, if confirmed, is a “real concern” that could require the county and the 15,000 employees covered to boost contributions starting in July 2006.

Neither the county nor its employees will need to contribute more in the next fiscal year, which begins July 1, said Rob Richardson, assistant to the county executive officer.

The study concluded that the Orange County Employees Retirement System’s pension fund, which previously was believed to be short by $1.3 billion, is underfunded by about $2.34 billion.

In 2000, the pension pool was fully funded, but based on the new figures it is now only 69.1% funded for long-term needs, for various reasons, including increased benefits.

Bringing the fund into balance would take years, unless the stock market rises and the pension fund’s holdings appreciate.

Keith Bozarth, the retirement system’s executive director, said he would ask the retirement board on Monday to hire another consultant to review the study done by the Segal Co.

County executives have begun studying the fiscal assumptions that accounted for the bleak outlook in the Segal report. Segal assumed, for instance, that the fund’s investments would return less than previously assumed, and that the county’s payroll would continue to increase, thereby increasing pension amounts.

“Although some of the assumed percentages may seem small, when you’re dealing with such large numbers,” the effect is substantial, said Thomas Beckett, county public finance manager.

The retirement system has assets of $5.5 billion and currently distributes funds to about 9,000 retired county employees.

The problem of underfunded pension funds is not unique to Orange County. Like other public employee retirement programs across the state, the county’s is still paying for the enormous stock market losses that hit pension fund investments when the dot-com bubble burst in 2000.