The Morning Report
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There have been some interesting pension-related developments lately:
- The pension system’s administrator, David Wescoe, said in a letter today that the system will appeal a ruling about a program allowing employees to purchase credit toward their pensions.
The lawsuit filed by ex-City Attorney Mike Aguirre said the credits were underpriced for several months in 2003, costing the city money. Superior Court Judge William Nevitt ruled that it was “unlawful” to charge the city for the resulting estimated $40 million shortfall.
Wescoe’s letter was in response to Councilwoman Donna Frye’s questions at a Monday update about the pension system. The letter states:
Because the Board lacked a quorum during its February closed session, it could not take action to appeal Judge Nevitt’s ruling. However, to protect SDCERS’ interests in the litigation and consistent with SDCERS’ Charters and Policies, I have instructed SDCERS’ General Counsel to file the appeal by the March 9 deadline.
Wescoe says the board will vote on the matter in closed session on March 20, after the appeal is filed.
- During that Monday meeting, the idea of extending the current payment schedule to reduce the annual hit on the general fund came up. Alison St. John at KPBS reports that new Councilwoman Marti Emerald made the following comment:
And even perhaps extend it out further because even if this recession was to bottom out this year and we were to start creeping back up we’re digging a hole between now and then and it certainly would help provide basic services to taxpayers here.
Extending the schedule would be hugely controversial for reasons former voiceofsandiego.org reporter Evan McLaughlin explained in this 2007 story, when the pension board was deciding between a 15-and 20-year payment schedule:
While the city has historically preferred to pay less money over a greater number of years in order to minimize the pension contribution’s impact on the annual budget, many favor paying the shortfall off more rapidly in order to avoid hefty interest costs that compound every year. For every year the debt is not paid off, interest accumulates at 8 percent annually. Many of the city’s past yearly payments have not even covered the interest that accrued, a practice known as “negative amortization.”
Emerald’s election opponent and former Pension Reform Board Chairwoman April Boling said it’s not possible to extend the schedule under the current system without causing negative amortization.
“You’re causing your pension deficit to grow,” Boling said.