San Diego's Pension Crisis - County's pension debt grows

San Diego Union - Tribune ^ | 12/1/05 | Leslie Wolf Branscomb

[NormsRevenge]

The county pension fund's debt has ballooned from $1.2 billion to nearly $1.4 billion in the past year, according to a new report that goes to the county retirement board today.

County officials are downplaying the increase, noting that the retirement system's assets could still cover 80 percent of what is owed if all its bills came due. By contrast, the city of San Diego has a deficit of at least $1.4 billion, but a funded ratio of just 65 percent.

At least one man says the county system's worsening condition is directly attributable to a 2002 decision that raised benefits.

Attorney Michael Conger, who sued the city of San Diego for underfunding its pension plan, alleges that when the county increased retirement benefits three years ago, it might have broken the law by failing to accurately report to the public what the enhancements would cost.

The county supervisors' agenda packet at the time said the boosted benefits would cost the county an additional $32 million a year.

Conger says his analysis shows the increase has been closer to $167 million a year.

"At best, this is gross mismanagement, granting $1.2 billion in new benefits which our children must pay off, while accidentally understating the price," Conger said yesterday.

"At worst, it was an intentional money grab at taxpayer expense, and the five supervisors intentionally misled the public."

Conger, who represents a couple of county employees involved in a dispute with the retirement association over retroactive benefits, said he considered seeking a court order to have all five county supervisors removed from office.

However, he acknowledged that would be a long shot. "I at least want to hold the supervisors responsible for this massive debt," he said.

Brian White, chief executive officer of the San Diego County Employees Retirement Association, said Conger's allegations were news to him.

"As I recall, we did have an actuarial study, and I believe the liability was accurately estimated and stated," White said.

Donald Steuer, the county's chief financial officer, said Conger's figures are incorrect.

Steuer said the $32 million estimate of the new benefits was in addition to the existing expenses.

He said the numbers were properly disclosed in advance of the supervisors' vote, although they were presented as a percentage of the county's payroll instead of as a dollar amount.

Ron Roberts, who was chairman of the Board of Supervisors when the vote was taken, seemed surprised by Conger's claim. "I can't say he's wrong," Roberts said. "I just don't know."

"There was no attempt to hide any of this," Roberts added. "Everything was done very much out in the open.

"That's not to say we won't in the future have to make some adjustments and changes, but overall the system is sound," he said. "We shouldn't lose sight of the fact that we are still over 80 percent funded, and there are no investigations going on here by the District Attorney or U.S. Attorney or anyone else."

County officials say comparisons to the city, whose smaller pension system makes its $1.4 billion deficit more pronounced, are not appropriate. The San Diego City Council voted to intentionally underfund its pension system, which has led to a myriad of financial woes for the city.

The county's $6.4 billion pension system has 33,645 members, nearly 12,000 of whom are retired.

The city's pension system has assets of $3.6 billion and about 19,000 members, including 8,000 retirees.

The city's pension system is being investigated by the FBI, the U.S. Attorney's Office, the District Attorney's Office and the Securities and Exchange Commission. Six of the city's former pension board members are facing corruption charges in Superior Court.

The county did not vote to underfund its pension plan. However, supervisors did vote to increase benefits Feb. 26, 2002, in some cases up to 50 percent.

The county's chief administrative officer at the time recommended approval of the higher benefits as a means to "significantly enhance the county's ability to attract and retain the 'best and the brightest' employees."

The change led to a surge in retirements. In 2002, the number of county retirees grew by 736. The year before, the ranks of retirees increased by only 218.

According to the report going to the retirement board today, the retirement fund's debt has increased by about $176 million in the past year – from $1.2 billion to almost $1.38 billion. The system's funded ratio has fallen from 81.1 to 80.3 percent.

Paul Dyson and Gabriel Petek, analysts with Standard & Poor's, said an 80 percent funding ratio is adequate. "Anything too far south of 80 percent would potentially be a cause for concern," Dyson said.

County officials said yesterday that the decreasing ratio is not a significant problem.

"It's a measurement, and it's certainly something we need to watch, but I don't think it's truly indicative of the health of a fund," said White, the retirement association's CEO.

Both White and Steuer, the county's chief financial officer, said the amount listed as the pension fund's debt was affected by "smoothing," a process by which investment gains and losses are equalized over five years.

"You try to dampen out the peaks and valleys by smoothing it out," Steuer said.

In the 2000-'01 fiscal year the fund did badly, Steuer said, losing $93 million. Those losses were smoothed into the annual valuation over five years, he said.

"Next year," he added, "will be a lot better."

[NormsRevenge]

Pension report

The San Diego County Employees Retirement Association will hear a report on its pension fund at a meeting at 8:30 a.m. in its board room at 401 W. A St., San Diego. The county pension fund's debt has jumped from $1.2 billion to nearly $1.4 billion in the past year, but its funded ratio remains over 80 percent.

[pikachu]

The retirees (including my sister) need to just grab the County Administration Building and County ops center in Mira Mesa. Then they can sell it off to realestate devlopers and pocket any overage for 'pain and suffering'.