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We got a prime entry for the “What-a-Joke ” award today:
David B. Wescoe has only been the administrator of the city’s retirement system for a month but already he’s got the patronizing thing down solid.
In today’s U-T Wescoe burst onto the public stage with a refrain that is so old and tired I threw up in my mouth a little after reading it.
Residents shouldn’t worry about the retirement system, he wrote. The city is paying plenty into the system this year, he wrote. Critics and reformers – including the city’s own Pension Reform Committee – who say the city should have put millions more into its system this year, are off base.
“Think of it like your mortgage…”
That’s the one that set me off. If journalists in this town received a dollar every time they heard that one, they’d be able to pay down the pension’s debt themselves.
But let’s take his advice and think of it as a mortgage. His entire piece is an apologia for the $162 million bill that the retirement system sent to the city. Remember, every year the city has to make a payment to its pension system so that the pension fund can keep investing and building up assets to pay retirement benefits out.
The reason why the pension crisis is in such a crisis is that that bill has gotten to be so big that the city has been forced to make cuts. So the city is always trying to cut down the size of the bill.
Wescoe seems to be more than willing.
The Pension Reform Committee – after several months of study – came out with a recommendation years ago that the city had to put at least, at least, $202 million into its pension system annually to keep the deficit from growing. But this year the pension system officials and the city – believing that their hands were tied by a legal settlement – decided to put only $162 million into the retirement fund.
Many critics have rightly denounced this. After all, even the mayor said before his election that at least $200 million needed to go into the pension system. It was only when he found out how hard that would be for the city to do that he changed his tune.
And we just don’t like doing anything hard around here.
But Wescoe had the arrogance to write this about the Pension Reform Committee and other reformers: “Although well intentioned, I haven’t seen any methodology to support their opinions.” Mr. Wescoe may want to sit down and read the committee’s report.
No matter. Let’s take his advice and think of it like our mortgages. That’s an absurd way to think about pensions, but this is the pension guy himself so let’s go with it.
The pension system is $1.4 billion in debt. That’d be one hell of a house, but we’re getting distracted.
The interest on pension debt is a fixed 8 percent.
If the city were to make payments every year on a mortgage that was $1.4 billion, my trusty accountant friend broke out her calculator and said it would have to pay about $125 million a year.
Add that to the cost just to pay the liabilities for the year itself – the so-called “normal cost” – and guess what you get. Come on. Just guess. Yep, just about $205 million. And that’s the first year of this “mortgage,” meaning the city would only be paying off about 1 percent of what it owed.
So if it’s paying more than $40 million less than that, what do you think is happening to the debt?
Time and time again, pedantic leaders of the retirement system have tried to talk down to San Diegans the way Wescoe did today – tell us to not worry our little heads about it and to think about it like a mortgage.
It didn’t work then, and it won’t work now.