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The Mayor’s Office is looking to form a committee to study a pension funding provision that, if altered, could lower the city’s annual payment into the system.

The city’s chief operating officer, Jay Goldstone, sent a memo to the City Council today saying an expert committee would study the issue of the provision known as the corridor, which I wrote about last week.

Pension hawks are warning that the elimination of the provision would repeat the now-infamous pension underfunding decisions of 1996 and 2002 — decisions that brought short-term relief to the fund at a long-term cost. City officials even cite similar motivations, saying they want to ensure the pension payment — which could balloon to $250 million in the 2011 fiscal year — doesn’t affect city services. From Goldstone’s memo:

Given the attention now being afforded this issue, I have recommended to the Mayor that he establish a committee of experts in this area to quickly study this issue and at a minimum educate the City on what the use of corridors means, determine options available to the City, explore SDCERS’s use of corridors in the context of the other smoothing, amortization and actuarial assumptions assumed by other public pension plans and perhaps make recommendations to the City Council.

This committee would be comprised of perhaps three actuaries and/or professors at local universities knowledgeable in actuarial science and would be staffed by myself and the Independent Budget Analyst. A final report would be presented to the City Council or one of its committees no later than early July. At that point, the Council could decide if it wishes to take a position on this issue. It would be a shame if the City Council did not to understand this issue prior to the release of its fiscal year 2011 ARC.

Again, should the City decide to take a position on corridors, this becomes advisory in nature only, since the ultimate decision rests with the SDCERS board.

The issue is being raised as the mayor is replacing three pension board members with new members, whose appointments were approved by the City Council this morning.

Councilman Carl DeMaio, who has expressed opposition to a potential change in the pension calculation, questioned the new appointees on their opinion of the corridor. While they said they had read about the issue, they said they had not formed an opinion, with some saying it would be inappropriate until they had expert information.

DeMaio voted against the new appointments, saying the mayor should reappoint outgoing board members William Sheffler or Tom Hebrank. Councilwoman Donna Frye expressed opposition to two of the three new appointees.

Update: A reader noted that I neglected to name the new pension board members. They are Edward Kitrosser, Herb Morgan and Richard Tartre. You can read their bios in the mayor’s memo on their appointments.

RANI GUPTA

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