Monday, July 17, 2006 | It is amazing how so many editorial statements can be generated on so little information, and your recent editorial “Attack on Prop G” was truly amazing. A couple points are worthy of mention.
“The city’s pension board apparently is ready to avoid Proposition G at all costs as well.”
Proposition G said that the pension fund liability must be amortized on a 15-year basis. The state Attorney General opined that under the California Constitution, each pension board has the fiduciary responsibility to establish the amortization schedule and Prop. G does not relieve them of that duty. No one has said the board does not have the authority to change the amortization schedule, and the board has not taken any actions or positions on “avoiding Proposition G at all costs.” The Gleason settlement, which is still binding, involves a number of participants, including the city. It specified the amortization period as well as the method of calculation of the annual contribution. The actuarial report presented to the board and to the mayor and council complies with that settlement. When the Gleason settlement expires, the board will have the opportunity to establish a different amortization schedule.
At the board hearing on the city’s annual employer contribution, member Bill Sheffler did raise the issue that the current contribution does not pay the interest on the unfunded liability (estimated at roughly $28 million). The board is aware of this fact but, according to advice from fiduciary counsel, is bound by the limitations of the Gleason settlement in establishing the annual contribution and precluded from changing the amortization period through fiscal year 2008 (i.e. until June 30, 2008).
From my perspective, fully formed only with 20-20 hindsight, I tend to agree with Bill Sheffler that it would have been helpful if the board had presented two annual contribution numbers to the city; one required and one suggested. That would have saved a lot of time, consternation, and misinterpretation of what the board could or should do. The board, however, has been covering a number of critical items, and frequently we are hard pressed to complete the required assignments; we don’t always have time to consider the optional.
One thing missing from much of the criticism in the media is the fact that the mayor and council are keenly aware of the unfunded liability. Our elected officials are working to place additional funds in the pension system; that effort should be noted.
Another statement that city leaders would in the future always be able to push debt off into the future “assisted by an always compliant group of pension trustees” is also misguided. In the recent past, the elected officials have referred to the pension board in a number of ways; I do not recall “always compliant” as one of the terms of endearment. Now, a better working relationship is emerging between the mayor and council and the Pension Board, and that’s good. But as for pushing debt into the future, I think Bob Dylan said it best, “Oh the times they are a-changin’!”.
The writer is a trustee for the San Diego City Employees’ Retirement System and represents retirees on the board of administration.