Monday, July 31, 2006 | As the other plaintiff in the Gleason Settlement and someone who has participated in this issue since before the time of Diann Shipione’s profound revelations in 2002 of how the pension system was being manipulated and fleeced, I too want to comment on San Diego City Employees’ Retirement System response to Proposition G’s passage.
Pension board member Joe Flynn’s letter took exception to the language in Scott Lewis‘ blog post. I would agree with Mr. Flynn that an “attack” is perhaps too strong a word. But the comment that the pension board is “ready to avoid Proposition G at all costs as well” may be closer to the truth. Certainly the board is doing its best to ignore Prop. G to a fare-thee-well.
The Gleason Settlement was crafted under very difficult circumstances. At the time, the city was run by Mayor Murphy, a council, and an administration that conspired to create the pension underfunding deal known as MPII. We can call them the Bad City. Most of them are gone now, and all, including those who remain are up defending their actions with city paid lawyers. Also gone are members of the Bad Pension Board who also conspired to create MPII and participated in the Gleason Settlement.
We now have a new mayor, some new council members, and a new administration. I will refer to them as the New City. Likewise, we have a New Pension Board.
When Jim Gleason and I, along with our attorney Mike Conger, engaged in settlement talks with the Bad City and the Bad Pension Board, we were unable to get the city to agree to a 15-year amortization period or to change the locked-in assumptions. We didn’t like it at all. We fought and resisted these less-than-perfect conditions. In the end, however, we agreed because the settlement terms were far better than the status quo even if less than ideal. Continuing to fight on for years in court would surely have put the system in fatal jeopardy, even if we had won.
Because the settlement was made with the Bad Guys, I will refer to it as “The Less Than Perfect Settlement.” However, we now have the New Guys in charge so to speak, and Mr. Flynn is one of them.
What puzzles me and bothers me is the same thing that bothers Scott Lewis. Why are the New Pension Guys confining, restricting, and complying themselves with a less than perfect settlement? After all, they are first and foremost required by fiduciary standards and the state Constitution to first and foremost look after the interests of the members of the system, and not the city.
The New Pension Guys can change that if they want to! It is clear that they don’t want to. Only if the city can borrow the money will the city consider it. But that’s just robbing Peter to pay Paul. Not a good solution even if a lender could be found. Where are the cuts and savings Mayor Sanders promised? Has anyone seen the money?
As for the SDCERS board, even though they feel “constrained” to follow the Gleason Settlement terms, it is rumored that they requested inclusion of the following included language in Charter Section 143 as it pertains to retirement contributions and Prop. G pursuant to lawsuit settlements:
“Notwithstanding the above, the Board shall retain plenary authority and fiduciary responsibility for investment of moneys and administration of the system as provided for in article XVI, section 17 of the California Constitution.”
(Plenary authority means absolute, unrestricted authority.)
If this is true, then the board does have the authority not to be confined to the terms of the Gleason Settlement. Mr. Flynn hints at this in his cleverly worded statements.
Another puzzlement is this: Why does the SDCERS actuary’s report have to comply with the Gleason Settlement? That is a major deceit to retirees, employees, and the taxpaying public in this new era of city transparency and ethical conduct.
It would be very easy for one of this nation’s most respected actuarial firms with powerful computers and software programs to generate two contribution numbers as suggested by board member Bill Sheffler. Mr. Flynn gives us a very weak excuse for not doing so, so weak as to be downright disingenuous and silly. The excuse:
“We don’t always have time to consider the optional.”
What?
Mr. Flynn says the mayor, the council and the SDCERS Board may all be “keenly aware of the unfunded liability.” However, they don’t want us to be keenly aware of just how much it really is.
Well, this Chicken Little for one would like to know how fast the sky is falling, thank you. And, it is keenly noted that we do appreciate that additional funds are being put into the system, even though they derive only because of lawsuit settlements.
One last comment on Mr. Flynn’s, “pushing debt into the future” and “Oh the times they are-a-changin’!”
Since the SDCERS Board is a creditor to the city for more than $1.4 billion, they should be demanding a significant financial forecast that is realistic, authentic and as accurate and detailed as possible on the city’s anticipated income, expenses and available assets to insure the city’s ability to pay the unfunded liability in the future. This has never been done in any way to the best of my knowledge.
The city’s credit union asks for more information to make a car loan than SDCERS has gotten from the city.
I wonder: Are the times really a-changin?