County of Sonoma’s unfunded pension liability down 37 percent since 2020, according to annual report on health of retirement system

The County of Sonoma has reduced its unfunded pension liability by 37 percent since 2020, the result of strong investment returns and decisions by the Board of Supervisors to pay down the County’s unfunded liability, according to the sixth annual State of the Retirement System report presented to supervisors today.

The County’s unfunded pension liability – the gap between the assets in the pension plan for County employees and the amount owed to retirees – dropped to $392 million in June 2024, down from $625 million at the same point in 2020.

The Board of Supervisors’ commitment to making early payments on the County’s pension debt is saving taxpayers millions of dollars in interest costs while bolstering the health of a pension system that supports 4,242 active employees, 5,760 retirees and beneficiaries, and 1,765 former employees who have not yet started collecting benefits.

“Our pension system must be sustainable, both for taxpayers and the retirees who depend on it,” said Supervisor David Rabbitt, chair of the Board of Supervisors. “That is one reason why the Board has made it a priority to pay down our unfunded liability annually. It has not been easy, but this report shows our persistence has resulted in making good progress.”

The pension plan for county employees contained $3.5 billion in assets at the end of 2023, up from $3.31 billion at the end of 2022. It was 93.9 percent funded as of Dec. 31, 2023, up from 92.4 percent a year earlier. In comparison, CalPERS, the retirement system for state workers, was 75 percent funded at the end of the 2023-24 fiscal year last June.

Since 2015, the Board of Supervisors has worked to reduce the county’s interest expenses by making early payments on the unfunded liability. In 2019, the Board began committing an annual sum equal to 0.5 percent of the county’s payroll toward reducing the unfunded liability, while continuing to supplement those prepayments with one-time payments when able. By the end of the 2023-24 fiscal year last June, the County had made $25 million in early payments on the unfunded liability, a policy decision that will avoid an estimated $20 million in interest costs over the next 15 years, and more over time.

In addition to paying down its unfunded liability, the County has now fully paid off $581.5 million in pension obligation bonds issued in 1993 and 2003, when it refinanced its unfunded liability to reduce interest costs. The County made the final payment on the 2003 bonds last year and has paid off most of the $532 million pension obligation bond issued in 2010. The County remains on track to pay off the $219 million remaining on its 2010 bond by the end of this decade.

Reducing pension costs has been a top priority of the Board of Supervisors, which has enacted policies to make the pension system fair, equitable and sustainable for taxpayers and employees alike. Overall, the County spent $130 million on pensions in the 2022-23 fiscal year, equivalent to 18.5 percent of the county’s total salaries and benefits and 8.2 percent of operating revenue. It included $72 million of employer contributions to fund the retirement system, $56 million in pension bond payments and nearly $2 million in prepayments to reduce the county’s unfunded liability.

The plan, managed by the Sonoma County Employees’ Retirement Association, achieved an annualized investment return of 12.05 percent in 2023, compared to a 6.18 percent decline in 2022. The pension system’s investments have earned 7.47 percent annually, on average, since 1994.

During the meeting, Chair Rabbitt thanked the members of the Independent Citizens’ Pension Committee, which makes recommendations that further the Board’s efforts to ensure a more fair, equitable and sustainable County pension system. 

The pension plan serves employees at the County of Sonoma and five other agencies, including Sonoma Water, the Community Development Commission, the Sonoma County Superior Court, the Sonoma County Transportation Authority and the Sonoma Valley Fire District. More than 60 percent of the County’s current workforce was hired after 2012, when state pension reforms took effect that reduced benefits and increased the retirement age under the Public Employees' Pension Reform Act.

The sixth annual State of the Retirement System report can be viewed at https://bit.ly/2024RetirementReport.

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Media Contact: 
Ted Appel, Communications Specialist 
publicaffairs@sonoma-county.org 
(707) 565-3040 
575 Administration Drive, Suite 104A 
Santa Rosa, CA 95403