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Monday, June 20, 2005 | Talk to most San Diego elected officials about the beleaguered pension system and you’re bound to be told that the problems precede their reign. To understand everything that’s happening now, an investigator must go back to 1996.
That’s exactly what City Attorney Mike Aguirre plans to do Monday with the release of his latest interim report on the history and origins of San Diego’s pension problems. It will be the sixth report that Aguirre has published in his attempt to prove that retirement benefits granted in 1996 and 2002 are illegal and should be rolled back immediately.
The city’s pension fund is facing a shortfall estimated at much higher than the reported $1.37 billion deficit. According to numerous city reports over the last year, the majority of that shortfall is a result of the benefit increases provided in the last nine years along with the city’s lack of funding for the plan.
Jack McGrory, city manager in 1996, orchestrated a way for the city to essentially borrow money from its pension system. To get the city’s supposedly independent pension board to go along with the deal, he offered employees increases in their retirement benefits. Employees, of course, dominated the city’s pension board in 1996 as they did in 2002 when a similar deal allowed the city to avoid a massive payment into the fund that had been set up by the previous agreement.
The pension board, Aguirre said, had proper warning that such a balloon payment would come and that the city would have trouble paying it. The city planned to make up for its lack of investment into the fund by ramping up the contributions to it over the years “without any calculations being done that that would be even remotely conceivable or doable,” Aguirre said.
At least one pension board member at the time, Ann Parode, asked for an analysis about whether the city could handle paying back what was essentially a loan from its pension fund.
Parode, now the campus counsel for the University of California, San Diego, is also the wife of Buzz Woolley one of the founders of the Voice of San Diego and a current member of the board of directors.
Parode said, in an interview, that it was clear the city would have to put in ever growing contributions to the pension plan because of the 1996 deal and that there was little evidence it would be able to handle that burden. “The retirement board was being asked to accept that there would be a balloon payment in the early years of the next millennium even with the booming stock market,” Parode said. “My recollection is that everyone understood what they were approving.”
Aguirre highlighted Parode’s opposition to the 1996 arrangement during a press conference Friday.
Parode said opposing the measure wasn’t met with enthusiasm. “It didn’t feel very good at the time. It was a very isolating experience,” she said. She was joined in opposition to the now notorious deal by fellow trustees Jack Katz and Paul Barnett. Barnett is now an executive in the administration of the plan.
City management officials have categorically rejected Aguirre’s interpretation that the benefits were illegal and they have so far ignored his demands that the city stop paying them immediately.
Labor attorney Ann Smith, whose efforts as the advocate for the city’s Municipal Employee Association, argues that only a court ruling could roll back the pension benefits and that would never come because of, among other things, the lack of timeliness of the complaint. “Leaving aside the moral and ethical issues around the question of whether you should roll back the benefits granted in those years, every case that gets filed in our courts is subject to being thrown out based on certain flaws, and one of those is untimeliness,” Smith said.
She said statute of limitation provisions would stop any effort Aguirre is pushing. “How do you bring a timely legal claim against benefits that have been paid for so many years?” Smith said.
Aguirre said the city can stop paying the benefits without consulting a court and then prepare to defend that move from any challenges. “The only way to undo the damage is to undo the deal,” Aguirre said.
Scott Lewis is a former reporter at The San Diego Daily Transcript. You can e-mail him at