What Price Pensions?
Boote says that at the time, the change increased the county's unfunded liabilities by only $15 million. "The reopening of the plan was very insignificant to the funding ratio and unfunded liabilities," she says. But shortly after the county board voted to make the change, the markets crashed--taking with them the illusion that safe, high-yielding investments would pay off the county's pension promises.
Boote says the county's estimates of its WCERS and health care liabilities proved accurate. Where it went wrong was in assuming that the funds would reliably earn high returns--as late as 2008, the "actuarial assumption" was 7.75 percent per year. Instead, as the stock market plunged, returns turned negative. "We lost $60 million in 2008," Boote recalls--22 percent of the funds' value.
Though the markets have since recovered, they still lag behind the returns the county banked on. Boote says it was those disappointing investment returns, not the addition of so many more employees, that really hurt the budget.