AFSCME Opposition Blocking Federal Action on OC Pension Bill

A key piece of federal legislation that could lower Orange County’s unfunded pension liabilities, by allowing current employees to opt-in to a lower benefit tier, has been facing a strong challenge from one of the country’s largest employees unions.

Just outside the Orange City Council meeting on Tuesday, Rep. Loretta Sanchez (D-Santa Ana) said the position of national unions like the American Federation of State, County and Municipal Employees are a key hurdle in moving forward with H.R. 205, which would resolve tax implications for existing employees who opt-in to a lower benefit as part of the “hybrid plan.”

“They haven’t been real thrilled with that bill,” said Sanchez, adding that she hopes AFSCME drops their efforts against it.

Meanwhile, the union – which represents about 1,200 social service eligibility workers at the county – says the changes would adversely impact rank-and-file workers who already face the lowest retirement packages among county labor groups.

AFSCME Local 2076 President Sandra Fox says that if workers opted into that pension plan, they’d have a lower benefit formula than Social Security.

“We are the bargaining unit that has the lowest retirement,” Fox said Tuesday evening. “We would lose even more.”

“The way that it stands right now I don’t see us supporting it,” she added, pointing out that AFSCME is fighting the bill at the federal level.

The county’s largest labor union – the Orange County Employees Association – and the county Board of Supervisors see it differently, placing their support behind the hybrid plan as a thoughtful approach to dealing with the county’s growing unfunded liabilities.

Sanchez emphasized that it’s important to move forward for the sake of the county's finances, citing recent municipal bankruptcies.

“We don’t want to end up like Detroit,” said Sanchez, who added that she's been meeting with AFSCME as part of her efforts to pass the bill.

This all comes amid a backdrop of significant pressure on public pension plans, including Orange County’s, where the unfunded liability has soared from just over $1 billion in 2004 to more than $5 billion today.

Over the last decade, a combination of benefit increases, market losses and changes in actuarial assumptions have all contributed to the skyrocketing of unfunded liabilities.

Many Republican leaders, like County Supervisor John Moorlach, have argued for an aggressive approach to paying down that liability — in some cases pushing to shorten some amortization schedules from a 30 year payoff down to 15 years.

Others, including city officials like Stanton’s Republican mayor Dave Shawver and many labor groups – like OCEA, the OC Professional Firefighters Association and the Association of Orange County Deputy Sheriffs – support speedier amortizations - such as 25 years - but argue that 15-year goals are too aggressive.

That debate exploded this summer, with county Treasurer-Tax Collector Shari Freidenrich casting the deciding vote on the issue, summing up the aggressive amortization plan supported by supervisors' appointees to the local retirement board as “too dramatic of a step.”

Beyond the issue of expanding pension liabilities, there seems to be consensus among OCEA and Moorlach that workers should have an option to opt into a lower benefit tier.

Typically it’s younger workers who choose lower retirement benefits in order to get higher take-home pay while working.

AFSCME, which is one of America's largest unions at 1.5 million members, is on the other side of the issue.

They argue that the 401(k)-style approach of the hybrid plan puts the workers’ financial futures at risk.

“Let’s say you do the wrong investment. What happens? You lose everything,” said Fox. “Again, it’s the county employee that has dedicated their whole life to servicing the public.”

Even with bipartisan support from Rep. John Campbell (R-Irvine) and Rep. Ed Royce (R-Brea), the bill faces an uphill battle in Congress.

So far this year, the House Ways and Means Committee has had 650 bills referred to it – including H.R. 205 – with three of those signed into law so far.

During the last Congress, from 2011-13, the committee saw 2,503 bills, of which 30 were signed into law.

Sanchez was in Orange on Tuesday as part of her regular Congressional updates throughout town.

In her presentation, she mentioned bills she’s co-sponsoring to revise requirements for restaurants to disclose calorie counts and help science and technology graduates who are on student visas gain permanent residency while they're working.

Sanchez also said she'll be hosting an informational workshop for veterans at Santa Ana College on Sept. 27th to help them understand their GI benefits, which include support for college tuition and books.

You can reach Nick Gerda at ngerda@gmail.com and follow him on Twitter: @nicholasgerda.