Want the news summarized?
Subscribe to The Morning Report.
For six years, I have watched the county of San Diego’s pension system devolve. Remember, this is the county — separate from the city, which has gotten all the notoriety for pension problems in San Diego.
As an exercise, I thought I’d try to summarize the last decade of the county employees pension system and why what has happened to it matters in 350 words.
Let me know how you think I did:
In 2001, all was well. The county of San Diego had set aside more than enough assets to pay the pensions of its workers for their expected life spans.
Then a great wave swept through California. Public workers everywhere were getting pension enhancements. The county decided to increase the expected pensions of its own employees — a boost of 50 percent. This jump wasn’t going from that point going forward. It was retroactive.
It was a giant giveaway — so good, hundreds of workers immediately retired.
Suddenly, the pension system had far fewer assets than it needed to fund the retirements it promised. So, it borrowed more than a billion dollars and invested all of it.
To make up for the losses — or just because they felt like it — the people who run the county pension fund became some of the most aggressive investors in their class. Twenty percent of the pension fund’s assets landed in secretive hedge funds.
In 2008, the county lost big. Billions swirled down the drain. A county supervisor was alarmist about the losses in the 2009 State of the County speech and pension officials ousted the architect of this investment strategy.
They decided to pay his replacement a lot more than his $209,000: up to $4.5 million over three years. Though he had no experience in this type of position, the new guy promised to both lower the risk the fund takes and increase its earnings. To achieve that, he is implementing yet another new, complex investing system where the fund would borrow assets.
To do all this, he claimed he would need control of the entire investment team at the pension system at more than $10 million a year. He almost got it, except that, after our inquiry, the attorney at the fund decided it would be a conflict of interest.
In 2001, county taxpayers did not have to put anything into the pension fund. In 2011 year, they will put in $324 million. That is all money that could have gone elsewhere.
— SCOTT LEWIS