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Friday, May 06, 2005 | More pension confusion. Two figures intimately familiar with the city of San Diego’s pension system are worried over a discrepancy in a dollar amount used to calculate the system’s deficit and the city’s annual contribution.
Pension board member and actuary William Sheffler and accountant April Boling – both former members of the Pension Reform Commission – sent off a memo to City Manager Lamont Ewell, Mayor Dick Murphy and the City Council on Thursday alerting them that two different figures are being used as the city’s payroll number to calculate pension numbers.
The city appears to be basing its calculations on a payroll number of $607.3 million, while the San Diego City Employees’ Retirement System actuary is using $540.2 million. Although neither Sheffler nor Boling know which one is more likely accurate, the effects could be great: If the pension system’s actuary is wrong, the pension’s deficit of $1.37 billion could be $200 million higher.
“It would mean the unfunded liability that is in footnotes that are about to go out the door to KPMG are understated,” Boling said.
KPMG is the city’s outside auditor that has long been at work on the city’s much-delayed fiscal year 2003 audit. The credibility of the city’s finances and financial reporting has been severely questioned in the last two years, as it has had to restate financial disclosures to investors after errors and omissions understated the depth of the pension plan.
The city is essentially barred from the public financing market pending the completion of the audit, which is on hold as investigations into possible wrongdoing by city officials continue.
The actuary uses the payroll number to make projections into the future as to what the city will owe its current employees when they retire.
Conversely, if the city’s number is wrong, its fiscal year 2006 contribution – stated on the books as $163.5 million – could be overstated by $20 million.
City officials have been saying that this year’s payment into the pension system is the first full payment made into the pension system in 10 years. While that is technically true, it’s because not all of the system’s costs are figured into the equation.
In fact, that payment will not stop the billion-something dollar deficit from growing.
Sheffler and Boling aren’t the only ones wondering the true size of the deficit. Last month, Councilwoman Donna Frye asked the pension actuary to figure the deficit using a number of different – and equally plausible – accounting assumptions. The deficit: $1.7 billion.
Board of Defectors Part III: The Update. Last month, businessman Ted Roth became the third of Mayor Dick Murphy’s new pension board nominees to bow out before its first meeting.
In the wake of that decision, Frye has for the third time nominated whistleblower Diann Shipione to serve on the board. Shipione was one of the loudest voices warning against the pension underfunding as a trustee. Of those speaking out, she was the most critical of the current administration.
“Ms. Shipione has earned the respect and trust of the public, and I know that she takes seriously and understands her fiduciary responsibilities as a trustee,” Frye wrote in a memo to Murphy.
Murphy said he wanted a fresh start in naming his nominees. No replacement for Roth has yet been named.
– ANDREW DONOHUE, Voice Political Writer
Please contact Andrew Donohue directly at