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When the county’s pension fund moved to outsource its investment team to a consultant, County Supervisor Dianne Jacob, a pension trustee, asked to first see how much it’d cost to staff an expanded investment system internally.
Neither Jacob nor the San Diego County Employees Retirement Association board formally agreed to expand the staff, nor did they agree to seek a waiver of pension fund employees’ salary limits. Jacob just asked for a comparison so they’d have another option.
But the fund’s CEO, Brian White, went ahead, sending a July 7 letter to the county’s chief administrator, Walt Ekard, asking for the necessary approval to waive the salary cap and expand the staff. White didn’t have his board’s approval.
If White’s request had been forwarded to the Board of Supervisors, they could’ve waived the salary limits (or kept them in place) — without any actual request ever coming from the very people who oversee the county’s $7.2 billion pension fund.
Ekard instead sent the proposal back, telling White that the pension board should first decide on it.
White’s proposal envisioned creating four positions earning $450,000 annually in base pay and bonuses and another 13 earning $300,000 annually including bonuses. None were slated to earn more than the top investment officer, Lee Partridge, who’s listed as a public employee making $886,000 in base pay and incentives.
Those salaries would make the pension fund’s employees the highest-paid in county government. Today, no county employee makes more than $274,000.
White now says that his proposal was preliminary and had been sent to see whether the county would be agreeable. He said late Tuesday that he didn’t believe he’d exceeded his authority by making the request without his board’s approval.
“This is the first step in a process,” White said. “I don’t think the county was under the impression that we are asking them to take that schedule and stick it in their salary ordinance.”
But Ekard said Wednesday that he believed White’s letter was a formal request — the letter says so — that sought necessary approval from the Board of Supervisors.
“Since it’d be a fairly radical change to our compensation ordinance and result in a significant decision to pay salaries we’ve never seen before in county government,” Ekard said, “I wanted to make sure it was a decision from the Board of Retirement and not the executive director.”
White said the letter was “only part of the story.” He said his agency would hire a consultant to study salaries before seeking any changes to its pay structure.
“It’s pretty darn difficult to have every word in a background document portray exactly what you’re trying to do,” he said.
White said Partridge would not become a public employee — though his proposal outlined a 30-member internal investment team and included Partridge. White said he’d included Partridge only so the internal model’s costs would be fully detailed.
He acknowledge the proposal would be a tough sell to the Board of Supervisors, which would have to approve raises for investment staff at the same time it’s been laying off other county employees.
“I don’t disagree that in these times that where the county is cutting back that this would be a very, very difficult sell,” White said. “But if you look at the big picture, it’d save the system potentially a large amount of money.”
White estimates that an internal investment staff would save by cutting management expenses. The organization currently budgets $90 million for the outside investors who actually move the fund’s money around. Expanding the staff and moving some of those positions in-house, he said, could cut outside fees by $30 million — netting about $21 million in annual savings.
Ekard said he’d want to know more before forwarding any subsequent request to the Board of Supervisors.
“A proposal like this is not something I’m going to willy-nilly take to the Board of Supervisors,” Ekard said. “I’m going to raise a lot of questions. I want to know it’s something coming from the full retirement board.”
The supervisors could be shut out, though, if state legislation passes.
The county pension fund’s employees are currently classified as county employees, subjecting them to county salary limits. The proposed legislation, Assembly Bill 1987, would allow county pension funds to drop the county worker classification, clearing the way to pay employees whatever they wanted.
The pension board is scheduled to meet Thursday at 8:30 a.m. to discuss the legislation and White’s salary waiver request.
— ROB DAVIS