Sunday, July 19, 2009 | Certain trustees on the board of administration of the San Diego City Employees’ Retirement Association took umbrage at the suggestion by City Councilman Carl DeMaio and Councilwoman Donna Frye that they refrain from studying tinkering with the actuarial funding methods.
After all, those trustees, and their Chief Executive Officer David Wescoe, were just gathering information. And silencing the investigation was compared to the council members meddling in pension business.
Well, I find the board’s curiosity about byzantine actuarial methods to be more than suspicious. It’s a clear message to the city; “you don’t need to cut spending and live within your means, we’ll front you a few (say 50+) million dollars, nothing needs to change.”
It’s a perverse, destructive message. It gives strength to the City Council members who are resisting financial reform. It weakens the mayor and the council minority who hoped to use the current situation to force those stubborn defenders of the status quo to the bargaining table. So it is more correct to say that this SDCERS faction is meddling in the city’s business.
The trustees have a supreme duty to protect the financial soundness of the pension plan. That duty is limited to protection of benefits already earned. And this is where everything breaks down. Certain elected trustees ( that is union representatives) are hoping that the distinction between that and preservation of all future benefits is never explored. That is the message of “certain actions detrimental to the SDCERS membership”.
Now, I disagree strongly with Wescoe, Tom Hebrank and the union coalition. If the choice is bankruptcy, or increasing plan underfunding for several more years, then the best outcome for the membership, and the security of benefits already earned is bankruptcy.
The plan actuary presented several projections of future plan costs, almost all were north of 30 percent of payroll, many dramatically higher. I submit that by any conventional financial standard those costs are unsustainable. At least one SDCERS trustee, Richard Tartre, got the message, the sooner the city cleans house the better.
Now some SDCERS trustees were insulted that in public comment before the board, I’d compared their behavior to enabling an irresponsible child.
I also said their consideration of changes in actuarial methods at this time was stupid, and dangerous. They should not expect any apology.