The Morning Report
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The pension board today heard a presentation from the system’s actuary, Gene Kalwarski, on the controversial accounting adjustment options that would allow the city to underfund its pension system as short-term relief for its structural budget problems.
The meeting was meant only to be “educational,” board members said, and Kalwarski, who answered the board’s technical questions about how the various options could play out, made no recommendations to the board on whether to adopt those adjustments.
At issue is whether the board should eliminate an accounting technique known as a “smoothing corridor,” which limits fluctuations in the actuarial valuation of the pension system’s real market value. Those fluctuations play a role in determining the amount of the payments the city is required to make to the system each year. It’s a complicated issue that Scott Lewis broke down in a column this morning.
Before Kalwarski’s presentation, City Councilman Carl DeMaio warned the board that adjusting its accounting method would only worsen the city’s budget woes.
“I really feel that history is repeating itself today. We saw the city underfund its pension system in 1996 and in 2002. … The city faces very significant financial challenges brought on by poor decisions by city politicians,” DeMaio said. “Don’t compound that with another poor decision. Don’t compound that by allowing the city to underfund its pension for a third time in order to take pressure off of labor negotiations next year.”
DeMaio said the board should not be influenced by fears the city has that higher payments into the pension system would require it to lay off employees.
“But that’s the right and sustainable way to deal with financial issues,” he said. “You don’t cook the books, which is what is being suggested today.”
Board member Susan Gonick rejected assertions that the board had an agenda to bail the city out.
“A majority of this board is independent and this board is well-reasoned. None of us is paid for our service,” Gonick said, adding that, “this morning we have been asked to muzzle and silence education and discussion.”
The board has been told that “in fact our even listening to a point is a slippery slope. We’ve been called stupid, hysterical, panicky, enablers and conflicted,” she said. “As an independent trustee and an independent-minded person who is used to weighing every issue, to me what would be stupid … would be to not give full floor to listening and being educated about an issue.”
Board members said they weren’t sure if they would discuss the issue any further, but if they were to act, they would do it by October.