09.07.2017

San Diego Leaders to Propose Underfunding Pensions - Again!

San Diego Leaders to Propose Underfunding Pensions - Again!

Vote Tomorrow on Dubious Plan That Bears Striking Resemblence to Earlier Illegal Deals that Put City on Brink of Bankruptcy   

San Diego - Less than a decade ago, the City of San Diego was teetering on the brink of bankruptcy because of illegal pension spiking and underfunding schemes concocted by city politicians and union bosses.  In a shocking move, tomorrow morning the city's pension board will take up a proposal (Item 3 - September 8, 2017 SDCERS Board Agenda) to artificially lower the city's required pension contribution by manipulating its actuarial model and debt repayment forecast. 

Why? City politicians and union bosses want to fund extra pay hikes for city workers. 

"History seems to be repeating itself as city politicians and labor union bosses scheme to once again intentionally underfund the pension system and divert those funds to give city workers salary increases," notes former San Diego City Councilman Carl DeMaio who authored the landmark voter-approved Prop B on Pension Reform.  "Unfortunately taxpayers will be left holding the bag," DeMaio warns.

Known as MP 1 (1996) and MP 2 (2002), the earlier pension underfunding deals resulted in billions in debt for taxpayers and resulted in criminal investigations and indictments of city officials and the eventual loss of the city's credit rating. 

Just as MP 1 and MP 2 were shrouded in complex actuarial presentations, this latest proposal is also presented in complex and fancy powerpoint slides - such as at the hearing held on this matter in July - watch minute 47 to 1:05 here: https://www.youtube.com/watch?v=58yccBkxNKU  During the presentation, the experts innocuously call it "layering" pension debt.  The net effect of the "layering" of the pension debt is clear: to let the city pay less now and push debt repayment off into the future and reduce pension reform savings for taxpayers.

At the July hearing, several pension board members admitted the move to lower the city's pension debt payments is designed to free up cash for pay hikes.  DeMaio reminds the members of the pension board that they face legal jeapardy for violating their fiduciary responsibility if they fail to act in the interests of system beneficiaries.  DeMaio urges the board to lower its assumed rate of investment return but reject the proposal to push back the payment of accrued pension debt.

Sept 8 SDCERS Agenda
https://board.sdcers.org/sirepub/mtgviewer.aspx?meetid=854&doctype=AGENDA

Item 3 Cheiron Discussion on Actuarial Funding and Economic Assumptions  Gene Kalwarski, Cheiron  (TAB 19)

https://board.sdcers.org/sirepub/cache/2/scjg1s3j0ibardlqhfsykhox/137360...

Discount Rate: Recommend a rate within a range from 6.5% to 7.0%, with a preference of 6.75% (GOOD)

Amortization Periods: No change to the 15 year gain loss period, consider 5 or 10 year layering to improve stability of projected employer contributions (slight preference for 5 years) (BAD)