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There is a belief by some that military leaders often prepare for the last war instead of the next.
This perception would also seem to exist in our city.
I speak of the “Battle of the Pension Plan,” which many of our city leaders continue to fight with intensity and cost to the people of San Diego far beyond what is any longer required.
Certainly the pension plan was one of the worse issues to face our city — the deficit that peaked at $1.4 billion caused serious concerns with possible bankruptcy of the city and/or the plan.
But perhaps worse than the financial impact was the violation of trust so many of our leaders participated in: Our elected officials approved benefits for which no funding was made available. Seemingly to appease, perhaps reward, labor leaders who had been instrumental in these officeholders’ own elections.
Pension board appointees, who approved increases in benefits that they and in some case they alone benefited from, violated our trust. While others on the pension board looked the other way, apparently feeling that being accepted by their peers was more important then being responsible, they violated our trust. Of course, it hopefully goes without saying that one trustee did rise to represent the people.
But the problems these individuals caused have been addressed by responsible individuals. Criminal charges have been filed against some, and there is hope charges will be brought against the others. The pension board has been replaced, in full, by new members, none of whom were involved in the mischief of the past.
These are solid people — Tom Hebrank the new board chairman hosted the Café Monday and explained his take on the pension plan “under new management.”
Tom is an excellent choice for chair. He previously served for two years as chair of the plan’s investment committee. The portfolio under this committee’s supervision performed admirably during his chairmanship. Tom is an accountant, he understands financial statements and dealing with annual audits. He has the personality of a facilitator, and an ability to bring people together — a valuable characteristic in a chairman of a public board.
Serving as vice chair is Mark Sullivan, a police officer serving as the San Diego Police Officer Association’s representative. Mark chaired the Navigant sub-committee.
Navigant is a well respected firm, listed on the NYSE — whom the pension board hired to review their operations. The Navigant report, in my opinion, is far superior to the Kroll Report, in its findings, recommendation and assigning of responsibility. Mark and the board saw that Navigant brought their report in on time and under budget, unlike the council’s management of the Kroll contract.
Mark’s committee led the implementation of the recommendations of the report. He is as knowledgeable as anyone who has served on this board; of its operation, its polices and its procedures.
At least four new trustee’s positions are awaiting the mayor’s selection of candidates. If he gives this the prompt attention it deserves, the board should be at full strength with the new appointees joining a present group of good people, committed to doing the best job possible for the people of San Diego.
In addition to the new board, the top management jobs have also been filled by new people, and these individuals are far better qualified then those they replaced.
With the board under new management, the second issue is how strong is the plan financially?
Early this year the plan’s actuary presented his report for FY ’06—(which ended June 30, ’06.) The report showed plan assets had increased $1 billion, from a year earlier, while the benefits (liabilities) for which the plan is responsible, had increased by $600 million, reducing the deficit from its record $1.4 billion to $1 billion.
As of May 2, which is 10 months into the new fiscal year, the plan’s market value is up almost another $1 billion to a market value of $4.9 billion. That is approximately a 60 percent increase in the value of assets in the pension plans, in under two years.
No one knows the direction of future markets and thus the effect on the plans asset value. The last two years have been very good years for the market. But the plan’s board and management have designed an investment strategy, which has taken advantage of this market, and in fact actually out performed it. It’s an active portfolio management, which the board spends a great deal of time on each month; managing, evaluating, seeking advice and counsel on from top experts, world wide, and then making necessary adjustments.
The plan’s actuary and the board of trustees have agreed to assist the city by extending the actuarial period to 20 years, which the mayor requested, instead of the 15 years the people of San Diego indicated by vote they preferred.
With the city committed to following this schedule and the City Council no longer about to grant expensive benefits without determination and commitment of funding sources, the plan would now seem well on its way to restoring financial credibility.
What remains is for our city officials to stop treating it like a battle to be fought. The city attorney needs to drop the frivolous lawsuits. The pension board has decided, as state law allows, that they wish someone else as their legal counsel. The actuary has decided a 20-year program is actuarially sound, and the board has set this as the time. And again state law seems persuasive in making this the board’s decision. The city attorney has better places to use his resources than fighting these already decided battles.
The mayor could help, and if he won’t the council should take charge and refuse to continue spending hundreds of thousand of dollars for a consultant to check the work of the actuary the board has selected. Those dollars can and should be spent on more pressing issues. And let me point out that the mayor’s consultant has twice checked the board consultant’s annual figures and found them acceptable. This double checking is not necessary, and not done for other city operations.
Just like an individual whose marriage breaks up because of a violation of trust by their spouse, they should not hold those sins against their next spouse. The sins of the former board and staff should not be held against this new board and staff.
Let’s encourage our city leaders to put their effort toward fighting the “new battles” not the past battles.