The county pension board’s investment earnings assumption fell more than 30 percent short last year but the county’s actuarial expert says all is well despite a $240 million warning issued by a Mill Valley critic.

Although pension investments yielded 5.01 percent, less than the pension board’s assumption of 7.25 percent growth, a bookkeeping “smoothing” program under which past gains exceeding assumption rates are allocated over five years enables a dip in payments from the Civic Center and the Novato Fire District next year.

What’s more, “not much happened this year, there were not significant gains or losses,” actuary Graham Schmidt told Marin County Employees Retirement Association trustees, or the pension board. “I think the investment return ratio is reasonable,” he added, referring to the Marin board’s assumption that pension investments will rise 7.25 percent a year.

“We’re perfectly comfortable with the assumptions as they are,” Schmidt said. Many other pension systems assume a 7.5 percent investment return.

But Paul Premo of Mill Valley, among three members of Marin’s pension watchdog, Citizens for Sustainable Pension Plans, attending the pension board session, said the Marin investment assumption is far too rich. It allows local agencies to pay less to meet obligations today while risking a sinking fiscal ship if the stock market tanks — and leaving a future generation of taxpayers to pick up the tab. Premo called for a 6.6 percent assumption rate, more in line with such assumptions by noted investors such as Warren Buffett.

“This is not a pretty picture,” Premo warned, adding the difference between betting on a 6.6 percent return and a 7.25 percent return is added debt of $240 million if the “overly optimistic” crystal ball predicting gains is wrong. As it stands, the county pension and retiree health system has an overall unfunded liability of $638 million, down from $881 million four years ago. The liability represents the value of benefits promised by county supervisors for which no money has been banked.

Graham argued the assumption rate, a combination of measured guesses about investment returns and inflation, is conservative because a 2.75 percent inflation factor, more than some experts expect, is part of the equation.

While Marin’s system needs to count on the stock market to make ends meet as predicted, the greatest danger is taking on too much risk to make up for capital market returns that are likely to be less than historical averages over the short term, the actuarial report said.

The board approved the actuarial report as presented, including a dip in contribution rates for some key member agencies while providing a hike in rates for San Rafael.

In San Rafael, the employer contribution rate will rise to 60.95 percent, up from 60.67 percent, meaning that for every dollar of payroll at City Hall, San Rafael taxpayers also will pay another 61 cents to cover pension costs. Total city pension costs last year were $17.8 million.

Novato fire’s rate dips to 48.68 percent, down from 50.90 percent, and Civic Center’s rate will be 26.50 percent, down from 26.86 percent.

Unfunded liability for pensions alone is rising over last year: County government or Civic Center, $244 million, up about 12 percent from $218 million; San Rafael, $141 million, up about 3.5 percent from $136 million; and Novato fire, $18.4 million, up about 10 percent from $16.7 million. The figures do not include the additional cost of unfunded retiree health benefits, or costs of bonds that some agencies put on another set of books. Civic Center liability, for example, does not include $110 million in pension bond debt that costs taxpayers about $8 million a year. All tallied, Civic Center pension, retiree health and pension bond liability of $638 million is headed down because of a rising stock market and extra or discretionary payments by county supervisors.

Year over year, the actuarial report reflects a hiring by public agencies after the recession, with 2,607 active employee members, up 3 percent. The overall workforce for agencies in the system is rising faster than the number of retired workers — which at 2,939 is up 2.5 percent. Average pay per active employee in the system is $89,000.