Thanks for the voluminous response to the post below about the county pension. Many of you had some interesting insights.

I wanted to deal with a couple of your thoughts.

Reader SteveFromSacto made this important point:

At the beginning of this decade, the county’s contribution to its employees’ pension fund was nil. They didn’t put any money in because it didn’t need any. That’s wrong, Scott. It was in 2000 and 2001, before Supervisor Jacob upped the ante, the problem began. Because pensions in San Diego County—and many other counties and cities throughout California—were doing so well at the beginning of the decade, the county, and others, stopped making contributions to the pension plan. That was a huge mistake.

Steve brings up a great issue. The county didn’t pay a thing into its pension after the dot-com boom.

It was wrong for me to imply this was a responsible decision. It’s certainly not clear that it was. There are a lot of ways to look at it. The system was 109 percent funded when Bill Clinton handed the country’s reins to George W. Bush. This means it the county’s pension had more than enough assets to meet its obligations from then on.

This, apparently, looked like a big huge delicious steak to county leaders that needed to be eaten quickly rather than saved.

Should they actually have invested more in the pension? I’m not sure. My experience with pension systems is that employee groups are not always advocating that more money go into the fund than is absolutely necessary. The county would have had to curtail raises, or services or freeze hiring in order to make a payment in those years the fund was fully funded. This would have not been met with enthusiasm by workers.

However if the county was indeed planning on enhancing its employees’ pensions, it should have invested in the plan as if it already had implemented them. They might say they had no idea that the following year they’d grant the most generous benefit package in the region to their employees. But you’d hope they would have had more foresight.

Anyway, I highlighted the fact that the county did not invest in its pension fund at the beginning of the decade because it illustrates just how much of a deficit the supervisors created. And it’s not a given that had they put money in the fund at that point it would have done much good. After all, the markets crashed shortly after they refused to put money in the fund. Chances are, the pension’s investment gurus would have just lost whatever the county put into it.

That is, they would have lost it unless they used a very conservative investment vehicle. The county’s pension system loves to use conservative investments, of course.

Reader Dan Tomlinson had this to say:

Had the county just stayed with the respectable pension plan it had… What makes the author qualified to judge a pension plan as “respectable”? If you are going to make an assertion like this, you should back it up with facts.

OK, facts! Before the 2002 benefit enhancement, the county’s retirement plan was indeed kind of complicated. There were two tiers of members in the program.

But the bottom line is this: Longtime employees were guaranteed a pension until they died that corresponded to 2 percent of their highest income multiplied by the number of years they worked. Add onto that health care benefits for the rest of their lives, a guarantee that the pension would go up with inflation and a low retirement age. This translates into what I would call a pretty good pension. In fact, I would love one like that.

Let’s make something clear, I’m not deaf to the contention that government pensions should set a strong standard in the employment market. Obviously, many taxpayers believe that we should pay as little as possible and have the least amount of benefits so we can get the most bang for the buck in services. While I sympathize with this, it would mean all governments should transition to a 401k type plan because that’s what companies are all moving to. I don’t necessarily agree that’s what’s best for our country. It’s not a good thing that unlike my parents’ generation, mine cannot ever expect to get a guaranteed pension in their golden years. It would be nice if our economy and companies improved to the point that they could compete for our services by once again offering reasonable pension plans.

So, I wouldn’t be adverse to the argument that governments should have slightly more lucrative pension plans in order to set a competitive bottom line for the employment market.

But a reasonable pension plan must be reasonably funded. This is what’s so exceedingly frustrating with local politicians. They, Republicans and Democrats alike, believe they can give away the house without paying for it.

I believe that the pension pre-2002 was strong enough to set a good standard while giving people a very good pension for the entirety of their lives. And I find it disappointing that we had to go through what we are going through in order for someone like Dianne Jacob to realize that they had a fine benefits program before they decided to dramatically enhance it.

Reader Danjul brings up this point:

A bit of history: in 2002 then governor Gray Davis proposed the 3 at 50 plan, ie. state employees could retire above age 50 with a retirement income of 3% times the number of years they worked times their latest annual income, indexed for inflation. Inotherwords if a state civil servant worked for 30 years he/she could retire with a benefit equal to 90% the latest salary indexed to inflation. This was a 50% increase for state workers, all in one fell swoop. To be competitive, counties and municipalities had to follow suit.

Yes, this is the common snag to come up. The county argued years ago that to “recruit and retain” quality employees, they must compete with other government agencies on these benefit packages.

This is why, months after the county passed its benefit enhancement, the city of San Diego decided to boost its pension deal. But the city had no money, so it also asked the city’s pension board to relieve it of the responsibility to save up for this deal. This is the infamous deal that landed the city in so much scandal for so many years.

Look, the idea that this benefit enhancement was needed to recruit and retain quality employees is belied by the fact that hundreds and hundreds of county employees actually rushed to the exits immediately after the deal was passed.

And, more importantly, suppose it is needed to recruit good employees. If that’s the case, the supervisors could have given the benefit from that moment forward. Instead, they decided to give it retroactively for all the years of service thousands of employees had already accrued.

You simply can’t make any argument this was needed to compete with other agencies. It was not. It was a giveaway for which we will be paying for decades.


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