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Old Mendocino County Courthouse Around 1915

California County Pension Debt

 

Mendocino County's Pension Debt



The Pension Debt:

$655 Million to Eliminate Unfunded Pensions
Created Through 2015



Mendocino County's Unfunded Pension Debt


Choices -

Growth & Amount of Debt

Pension Related Payments

County Payments

$700 Million to Pay Debt!

Profound Funding Failure

 

Total Unfunded Pension Debt Payments

Total Payments to Eliminate Unfunded Pension Debt Created to Date - County of Mendocino 1998 - 2040 (official payment schedules)

Between 1997 and June 2015 the County had paid about $150 million for its unfunded pension debt, both Pension Bonds and Unfunded Pension Amortization Payments to the Pension Fund. - of its unfunded pension debt created through June 2014. Twenty-two million was payment of the debt principal itself and $128 million was interest expense.

According to the County's official payment schedules for Pension Bonds and Unfunded Pension Amortization Payments to the Pension Fund, the County will pay another $505 million to pay off this debt through 2040. That will be $250 million of the remaining debt itself and another $256 million of interest expense.

Therefore the County's plan is to pay a total of $655 million through to pay off unfunded pension debt created up until June 2015 - $270 million of unfunded pension debt and $385 millioninterest expense.

Total Payments through 2040 to Eliminate Unfunded Pensions Created through June 2015
Rounded to Nearest $1 Million
1997 - 2015 2016 - 2040* Total
PENSION BONDS
Principal $44 $68 $112
Interest 71 26 97
Total $115 $94 $209
UNFUNDED PENSION AMORTIZATION
Principal ($22)* $181 $158
Interest 57 230 287
Total $35 $411 $446
TOTAL
Principal $21 $249 $270
Interest 128 256 384
Total $150 $505 $655
* Pension Bonds paid off in 2117, Current Plan is to pay off Unfunded Pension Amortization in 2040
* The County adopted a 30 year amortization plan that actually pays less than yearly interest expense for the first 12 years - thereby increasing the County's unfunded pension debt

Major Point!

Nearly TWO-THIRDS of a BILLION DOLLARS will be extracted from the 90,000 people who live in Mendocino County and our weak local economy to pay this debt that - according to every pension funding plan adopted by the Retirement Board - is NOT supposed to exist.

It won't produce one minute of County services or fill one pot hole. Not one dime will go to salaries or benefits for the next generation of County employees.

Kids not even born yet will be paying this debt - and won't get a thing for it.

Yearly Payments Will Continue to Increase

Yearly Payments for Unfunded Pension Debt - Mendocino County This shows the County's yearly payments for unfunded pension debt - both Pension Bonds and Unfunded Pensions owed to the Pension Fund. These are actual payments through 2015 and are the amounts specified in the County's official payment schedules through 2040.

(1) The County sold $31 million of Pension Bonds in December 1996 to pay down unfunded pensions.

(2) The County borrowed another net of $76 million by selling more Bonds in December 2002 to pay down newly developed unfunded pensions.

(3) The Great Recession produced a third huge surge in unfunded pension debt. This time instead of selling more Bonds the County attempted to raise the sales tax - but that effort was defeated with a 70% no vote. The Retirement Board then allowed the County to gradually increase its payments over the following 6 years.

(4) Finally this gradual "phase in" of increased payments ended in 2016 with the County paying about $11.5 million for unfunded pensions to the Pension Fund and about $8 million for the Bonds - a total of $19.5 million in the fiscal year ending June 2015. But payments are planned to increase about 3% a year for more than a decade.

(5) The Pension Bonds will be paid off in 2017 which - if there were no more new unfunded pension debt - would reduce total payments as shown here.

(6) The County is amortizing the debt created by the Great Recession over 30 years. Any subsequent increases in unfunded pensions are currently being amortized over 16 years. This reduction in yearly payments - assuming everything works according to the Retirement Board's plans - results from more recently created debt being paid off over 16 years.

(7) The final County payments to the Pension Fund for the unfunded pension debt created in the Great Recession is currently scheduled for 2040.

Major Point!

But given the history of the last 2 decades - why should anyone believe the Retirement Board won't create - MORE DEBT?

 
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