TheBakersfieldCalifornian.com

Kern County's annual pension debt to the Kern County Employees' Retirement Association will climb by $11.3 million to a grand total of $210 million in the fiscal year that starts in July.

On Wednesday the retirement board accepted the pension system's annual actuarial report, prepared by The Segal Company, and voted to approve contribution levels for the agencies in the system. Now the bill goes to Kern County supervisors, who are required to accept the number and pay the tab.

The Segal report, the first from KCERA's new actuarial firm, highlights the ongoing blow to the county's finances that was dealt by the downturn in the economy in 2008 and 2009.

Supervisor Zack Scrivner sits on the KCERA board and said that market returns, though good, haven't been strong enough to offset the losses.

In raw market numbers, the investment year that ended June 30 was stellar for KCERA. Paul Angelo of The Segal Group said the system's investments clocked a 21.7 percent return.

But the public pension system's bottom line got worse as its unfunded liability -- the gap between the money it has and the money it needs to fund the pensions of member employees and retirees -- climbed from $1.66 billion in June 2010 to $1.83 billion in June.

KCERA now has only 60.8 percent of the money it needs to pay the pension bills it is expected to owe in the future.

Angelo's report makes the reason clear: KCERA is still struggling to work through the massive loss it took when the nation's housing market imploded and dragged the economy into recession in 2008.

The pension system lost $315 million in the first six months of 2008 and an additional $654.9 million between July 1, 2008, and June 30, 2009.

Most of those losses didn't hit the KCERA system at once. The losses were "smoothed" -- deferred to future years -- to avoid a dramatic, immediate impact on the bills member agencies had to pay.

So KCERA was only allowed to claim a 1.6 percent return after actuarial calculations were applied to its market returns. That missed the 7.75 percent target rate.

And the county of Kern, by far the largest employer in KCERA, and the water districts, courts and other agencies who are also part of the system, will now have to pay more to fund their workers' pensions.

Nancy Lawson, Kern County's budget and finance officer, said the county is already preparing to budget for the increased cost from KCERA. County departments will all be asked to absorb the cost into the revised budgets they will soon begin to prepare for the coming fiscal year.

And the issue is likely to continue to create sparks as the long contract battles between the county and its unions continue.

Scrivner said that aside from eventual market turnarounds, the true solution to Kern County's pension problem will be to negotiate concessions from county unions on both the value of new employees' pension benefits and the contributions paid into the pension system by employees.

Those talks have stalled after more than 1 1/2 years without a new contract.

"I do still have some hope that we are going to be able to come to an agreement with employees," Scrivner said.

Chuck Waide of the Service Employees International Union, Local 521, the union that represents most county general employees, said the economy is rebounding and the pension system is recovering.

He notes that SEIU agreed in 2007 to have new employees earn a smaller guaranteed pension as well as the government version of a 401(k) plan.

Waide said the concessions the county is asking for -- higher pension and health care contributions from workers -- won't save the pension system, only shift some of the county's cost to its employees.

The political considerations aside, Segal's report isn't all bad news.

According to Angelo, KCERA still had $599 million in past losses to make up for in June 2010. The 21.7 percent market return in the 2010-2011 fiscal year helped whittle that down to $162 million.

"Given the returns that we've had in the most recent two years, there have been improvements in the very negative situation," KCERA Executive Director Anne Holdren said.

But she would not predict that the road is bright going forward.

"We obviously have challenges ahead," she said. "There is still some of that hole to fill."