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Old Mendocino County Courthouse Around 1915

California County Pension Debt


Mendocino County's Pension Debt

Immediate Causes of the Debt

Not Enough Invested - or Is It Too Much Promised?

Immediate Causes of Unfunded Pension Debt

Choices -

Immediate v. Fundamental Causes

Inadequate Investment Profits

Not Enough Money Invested

The "Excess Earnings" Fraud

Retained Profits Even Worse

Actuary Built In Debt

Other Immediate Causes


The Fund Mendocino County's Pension Fund averaged 80% funded. Would have been 60% without the Pension Bonds. can't make investment profits on money it doesn't have. It averaged 80% funded. Even though the Fund earned less than its target rate, it did earn approximately 6.5%. Had the Fund been fully funded about 25% of the County's Unfunded Pension Debt would not have developed.

The Pension Fund would have been 60% funded on average without the Pension Bonds.

But why was the Fund underfunded? That's the question we're trying to answer.

Remember the Pension Funding Formula discussed earlier:

  Employer and Employee Contributions + Investment Profits
Pensions + Pension Fund Expenses  

A Pension Fund is considered underfunded if there isn't enough money in the Fund today so that even if all assumptions come true (other than requiring extra unfunded pension amortization payments) not all the pensions to be paid in the future that have already been earned in the past will be paid.

In other words - not enough money was put into the Fund to pay the pensions that were promised.

So which caused the underfunding - the lack of adequate funding, or the over-promising of pensions? I'm not talking about whether or not the pensions that were promised are "fair". This is a "purely" financial discussion - and from that point of view you could look at it either way.

The first immediate cause of this debt was that investment profits were significantly below what was required - the second item on the funding side of the equation.

But there have been actions on the payment side of the Funding Equation that significantly contributed to Mendocino County's unfunded pension debt. I discuss one of those in Pension Increases When County Had Over $100 Million Unfunded Pension Debt in the Stories and Evidence section.

2002 Through 2013: ~$110 Million Unfunded Pension Debt

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