After the city of San Diego’s retirement board voted to uphold a pension accounting rule Friday morning, San Diego City Employees’ Retirement System CEO David Wescoe blasted those who criticized the board’s decision-making process.
Targets were City Council members Carl DeMaio and Donna Frye (though they were unnamed), pension watchdogs who warned that the city was set to repeat mistakes of the past (though they too were unnamed), and the San Diego Union-Tribune editorial page (it was named).
Friday morning, the retirement board considered changing an arcane pension accounting rule known as the corridor. In essence had the board changed the corridor, it would have dropped the city’s payment to the pension fund by $30 million next fiscal year in exchange for larger payments to the fund down the line. Read a summary of the issue here.
Wescoe said it was the board’s constitutional and fiduciary duty to examine changing the corridor in light of massive stock market declines.
Wescoe’s caustic castigation of SDCERS’ critics defies attempts to summarize. Though I’ve linked to a PDF of the statement here, I thought it best to post the whole thing. If you want to skim, I have reaction from SDCERS’ board members below it.
Today, as you did in July, you heard from your actuary and fiduciary counsel about the impact of fiscal year 2009’s investment results, which were among the worst since 1929, on SDCERS’ Trust Fund. Unfortunately, but predictably, your prudent and professional review of this issue has been criticized by a vocal few.
For example, in July, two elected officials, who took an oath to uphold the California Constitution, demanded that you violate that same oath which you took by “prevent(ing) any further discussion of these actions outright.” To do so, of course, would have required you to ignore the Constitution’s specific mandate that you discharge your duties “with the care, skill, prudence, and diligence under the circumstances then prevailing that a prudent person acting in a like capacity” would use. Their surprising assertion that you ignore an important funding issue central to the administration of this System — an issue that is being discussed nationwide — would, in fact, have caused you to violate both the Constitition and your fiduciary duty to this System’s members, beneficiaries and retirees.
Then, a few concluded months ago that your discussion of this topic was another San Diego “Manager’s Proposal.” Their contention is absurd.
The SDCERS Board was reconstituted in 2005 to ensure that a majority of Trustees would have no financial interest in the System making SDCERS’ Board the most independent of any public pension system in California, if not the country. And, of course, there was no manager’s proposal on the table, there was no quid pro quo under discussion, there was no non-GASB compliant actuarial method being considered and there was no labor negotiation underway.
Indeed, Mayor Sanders explicitly and publicly recognized that it is this Board and not the Mayor or City Council that determines the amount of the [annual required contribution to the pension plan]. City Council members have expressed similar views. And SDCERS’ two other plan sponsors, the Airport Authority and the Port District, both held public meetings to discuss this topic and provide official feedback to SDCERS.
In short, any comparison of today’s discussion to the 1996 or 2002 City-motivated manager proposals is a mischaracterization of fact and an insult to the intelligence and integrity of SDCERS’ Trustees, actuary, fiduciary counsel and staff.
A few have criticized you solely to advance their own personal political agendas and their personal views about the City’s financial circumstances. The proper venue for that discussion is in the City Council’s chamber, not this Boardroom. Neither political agendas nor the individuals who espouse them have any proper place here.
And, finally, this morning’s Union-Tribune editorial calls it “perverse” for the Board to be discussing this issue. What is perverse is the paper’s continued political agenda to pressure you to ignore your legal and fiduciary duty to discuss this issue.
The truth is that the decision you made today was based on facts, on stakeholder input, on expert opinion, on robust discussion and on rational analysis. It followed a transparent process based on your Constitutionally-mandated fiduciary duty to the System’s participants. It was free of any improper influence. It was made in public in front of wide-open doors. And, it has been an impressive example of the way a public body should conduct its business.
I am proud of you, and I am proud of SDCERS.
After Wescoe’s speech, I asked two trustees on either side of this morning’s vote what they thought.
Board Chairman Mark Sullivan, who voted in favor of keeping the corridor, said Wescoe’s statment was “a reflection about what the majority of this board feels, if not everybody.”
“We’ve been getting a lot of grief about even this discussion,” Sullivan said. “I think it’s totally inappropriate for politicans and pundits to try to influence the decision of an independent board, which we are. Telling us that we can’t even discuss an educational opportunity so we can be more informed about which financial decision we’re going to make, that’s ridiculous.”
Board member Steven Meyer, who voted against keeping the corridor as is, called Wescoe’s comments “very courageous.”
“They succinctly captured, I think, the public debate or what’s been reported in much of the popular press,” Meyer said.