Pat's Perspective

Board Approves Historic Pension Reform

For several months, the County has been engaged in discussions with employee unions over how to rein in pension expenses. I am pleased to report that the Board of Supervisors approved a deal on July 21, 2009 as part of a new contract with the Orange County Employees Association (OCEA), the County’s largest union, which represents a significant accomplishment in key areas of pension and overtime reform.

The agreement reflects the Board’s priority to address increasing pension costs and to reform how overtime is paid in the County. With the adoption of the agreement, overtime will be paid on regular hours worked rather than on all hours paid to employees who work overtime. This change could achieve up to a 30 percent reduction in overtime costs.

The agreement also contains provisions for the County to implement a lower pension formula, 1.62% at 65, combined with a Defined Contribution Plan. New employees will be given the option of selecting the current 2.7% at 55 retirement formula or the new, lower formula; and current employees will be provided a one-time opportunity to select the lower formula. The lower formula, combined with the Defined Contribution Plan, will provide a significantly lower cost to the County and to employees.

The implementation of the new pension program requires approval by the State Legislature. The required legislation has been drafted in cooperation with the County and OCEA and is currently progressing through the State legislative process.

Additionally, to assist the County in meeting our current budget challenges as a result of the economy, the union agreed to receive no salary increases for employees for at least a year.

This agreement, which has been ratified by the OCEA, is an important step forward for the County in our efforts to reduce unfunded pension liability and ensure that we do not pass on debt to future generations.

I would like to commend my Board colleagues for standing firm with me on this important issue of fiscal responsibility. Working together with our unions, the County will continue to progress toward making pensions and other post-employment benefits sustainable and less of a burden on taxpayers.

To view a press release by the Orange County Taxpayers Association that was issued Tuesday, July 21 to congratulate the Board of Supervisors on this achievement, please click here.