Ignoring risk hides pension costs from policymakers

A new rule currently being considered by the Actuarial Standards Board would finally require public pensions to meaningfully account for risk. In a commentary for the Voice of San Diego, I explain how this would benefit all stakeholders.


Future Taxpayers and Public Employees Are Paying for Past Pension Mistakes

As San Diego County sues its own pension fund for the right to slash benefits for new hires, and while taxpayer costs continue their ascent to record-high levels, understanding the true cause of the county’s pension crisis is more important than ever.

While some blame the stock market crash of 2008-09, the real culprit was an explosive growth in the size of promised pension benefits, and the flawed accounting practices that encouraged such recklessness.

Over the past 30 years, the accrued liabilities of the San Diego County pension fund, SDCERA, increased by nearly 1,300 percent — almost four times more than the growth in the county’s total personal income over that same time period.

The willingness to make such large pension promises stems from accounting practices that understate their cost by ignoring risk entirely.

Specifically, by treating assumed future stock market returns as certain — despite acknowledging their investments will underperform expectations roughly 50 percent of the time — SDCERA can “discount,” or minimize, the estimated cost associated with safely funded employees’ future pension benefits.

Of course, ignoring risk on your balance sheet doesn’t make it go away in the real world, which is why this approach is outlawed in the private sector and rejected by public pension plans in more than 100 countries worldwide, with U.S. state and local public pension plans being the only exception from that consensus.

This also reveals why blaming San Diego County’s soaring pension costs on the Great Recession is so misleading. The cost was created when the promises were made, as indicated by SDCERA’s nearly 1,300 percent increase in accrued liabilities, not when they were exposed by a market downturn.

But because defraying costs to future generations is so politically attractive, there has been little interest in reform, despite the urgings of those like Warren Buffet, Nobel Laureate William F. Sharpe and what seems like the entirety of the economics profession.

Thankfully, after years of fierce criticism by prominent actuaries worried about the harm that would befall their profession as a result of its continued silence, the Actuarial Standards Board proposed a new rule that would finally require pension plans to meaningfully account for risk.

While the proposal would simply require plans to disclose the level of risk associated with their funding strategy, government unions are nonetheless howling in displeasure at the idea, terrified at the consequences of making the full cost of their pensions known.

But this reflexive opposition to honest accounting is short-sighted and destructive. As the experience of San Diego County so aptly demonstrates, the damage caused by overpromising is often borne by government workers themselves, particularly future hires.

After having been lulled into a false sense of security by numbers that overstated the health of the fund while understating the cost of increasing benefits, the County Board of Supervisors in 2002 passed a 50 percent benefit enhancement for all county employees.

But when the inevitable market downturn hit — a certainty for any long-term investor like SDCERA — paying the full cost of the 2002 enhancement fell to today’s taxpayers and public employees, who never received any of the benefits they are now being required to pay for.

In addition to forcing both groups to pay more, while getting less, the county also repeatedly cut the benefits offered to new hires to get its soaring retirement costs under control.

After reducing the retirement benefits offered to new hires in 2009 and again in 2013, the county earlier this year approved a plan to cut new employees’ benefits to the lowest level allowable under law, which are worth roughly half as much as those received by pre-2009 employees.

The current lawsuit that has delayed the implementation of this new, bare-bones retirement plan focuses only on how and when that plan will be implemented, not if.

This makes clear that all groups — including government employees — are harmed by the status quo.

Had the Board of Supervisors been informed of the true cost of the excessive and unnecessary 2002 benefit enhancement — and the degree of risk associated with relying on stock market returns to pay for it — this whole mess could have been avoided.

Requiring public pension funds like SDCERA to meaningfully account for risk will make it much harder for policymakers to force future generations to pay for their past funding failures.

And that’s good news for everyone concerned with the fiscal health of the county and the fair treatment of all its citizens — taxpayers and public employees alike.

Robert Fellner is executive director of Transparent California. This commentary was first published by the Voice of San Diego.

New CalSTRS data: San Diego’s ‘$100K club’ up 90% over past five years

The number of retired San Diego County educators collecting pensions of $100,000 or more from the California State Teachers Retirement System (CalSTRS) has nearly doubled since 2012, according to just-released pension payout data from TransparentCalifornia.com.

Last year, 858 CalSTRS members who retired from agencies in San Diego County collected pensions of $100,000 or more — a 90 percent increase from 2012.

The top 3 San Diego County CalSTRS pensions went to:

  1. Rudy Castruita, San Diego County Office of Education: $288,945.
  2. Larry Perondi, Oceanside Unified: $278,015.
  3. Kenneth Noonan, Oceanside Unified: $274,248.

Statewide, 13,527 CalSTRS retirees collected pensions of at least $100,000 last year, which marks an 87 percent increase from 2012, according to the data.

The below chart displays the 10 San Diego County school districts with the most $100,000 or greater CalSTRS pensions, as well as the percentage increase that has occurred since 2012:

School District

# of $100K+ CalSTRS Pensions

% Increase from 2012

San Diego Unified School District

142

129%

Sweetwater Union High

84

62%

San Diego Community College District

60

107%

Palomar Community College District

48

100%

San Diego County Office Of Education

47

68%

Miracosta Community College District

41

17%

Poway Unified School District

40

167%

Grossmont Union High

39

56%

San Dieguito Union High

37

118%

Southwestern Community College District

35

75%

To view the entire CalSTRS dataset in a searchable and downloadable format, please click here.

Transparent California will be continually updating the site with new, 2017 data from the remaining pension funds in the coming weeks. Be sure to follow our blog and Twitter accounts, or sign up for our mailing list, in order to receive the latest updates.

For more information, please contact Robert Fellner at 559-462-0122 or Robert@TransparentCalifornia.com.

Transparent California is California’s largest and most comprehensive database of public sector compensation and is a project of the Nevada Policy Research Institute, a nonpartisan, free-market think tank. The website is used by millions of Californians each year, including elected officials and lawmakers, government employees and their unions, government agencies themselves, university researchers, the media, and concerned citizens alike. Learn more at TransparentCalifornia.com.

New 2017 pension data released: CalPERS payouts approach $21 billion, up 43% over past 5 years

Today, TransparentCalifornia.com — California’s largest public pay database — released pension payout data for the California Public Employees’ Retirement System (CalPERS) for the fiscal year ending July 31, 2017. The data show total pension payouts of $20.63 billion — a 43 percent increase from the amount reported in 2012.

In just the past fiscal year alone, CalPERS began paying out pensions to 25,472 new retirees, at a total cost of more than $1 billion annually. The top 5 largest pensions among those who began drawing a CalPERS pension in the past fiscal year went to:

  1. Former Gardena City Manager Mitchell Lansdell: $258,992.
  2. Former San Jose State University President Mohammad Qayoumi: $225,283.
  3. Former Clovis City Manager Robert Woolley: $221,604.
  4. Former Placer County Sheriff Edward Bonner: $216,388.
  5. Former Santa Clara County Undersheriff John Hirokawa: $215,810.

When broken down by last employer, the dataset reveals 40 agencies or state departments with at least 100 CalPERS recipients drawing pensions of $100,000 or more. The top 10 agencies or state departments with the greatest number of $100,000 or more pension recipients are shown below:

Last Employer

# of $100K+ CalPERS Pensions

Department Of California Highway Patrol

1217

County Of Santa Clara

920

Department Of Corrections

613

City Of Oakland

549

Department Of Forestry And Fire Protection

521

County Of Riverside

499

City Of Long Beach

374

City Of Santa Ana

285

City Of Anaheim

283

Department Of Justice

279

To view the entire CalPERS dataset in a searchable and downloadable format, please click here.

CalSTRS data not forthcoming

Update: The CalSTRS data was provided shortly after this piece was published.

2017 data for the California State Teachers’ Retirement System (CalSTRS) has yet to be provided to Transparent California in a useable format, despite the data already having been compiled and in CalSTRS possession for at least the past 25 days.

CalSTRS has twice mailed badly damaged, unusable CDs which purportedly contain the requested information. The system has refused to deliver the information via alternative means.

“CalSTRS is plainly required to make this information available in an electronic format under the law,” according to Transparent California Executive Director Robert Fellner. “Sending copies of broken, unusable CDs is not in compliance with the mandates of California’s Public Records Law. Even more bizarre is CalSTRS refusal to deliver the requested information in any one of the less-costly alternative methods suggested by Transparent California. We hope CalSTRS finds a way to comply with their obligations under the state’s public records law and provide the requested information in a useable format, just as more than 2,500 other California governments have been able to do.”

Los Angeles County

New 2017 calendar year data for the Los Angeles County Employees’ Retirement Association (LACERA) is now available on TransparentCalifornia.com.

In just the past two years, LACERA began paying out pensions of $100,000 or more to 839 new retirees — or more than 15 percent of the total new pension recipients over that same time period.

The three largest payments among those recent members went to:

  1. Former Los Angeles County Assistant Sheriff Richard Barrantes: $309,142.
  2. Former Chief Physician Meenal Patel: $276,005. 
  3. Former Sheriff’s Department Chief David Fender: $271,957.

The overall top pension remains former Harbor-UCLA Medical Center Chief Physician Charles Mehringer, who earned $411,443 last year.

The data also reveal a significant difference in the average full-career pension by member type, as shown in the chart below:

Average 2017 full-career LACERA pension, by member type

Non-safety

Sheriff

Fire

$68,318

$107,893

$122,845

To view the entire LACERA dataset, please click here.

San Diego City

The just-released 2017 pension payout data for the San Diego City Employees’ Retirement System (SDCERS) reveals an average pension of $85,670 for full-career retirees.

The three largest payments went to:

  1. Former Deputy City Attorney Diane Silva-Martinez: $893,731.
  2. Former Fire Captain Bradley Cronk: $871,599.
  3. Former Assistant Police Chief Sarah Creighton: $854,225.

To view the entire SDCERS dataset, please click here.

Transparent California will be continually updating the site with the new, 2017 data from the remaining pension funds in the coming weeks. Be sure to follow our blog and Twitter accounts, or sign up for our mailing list, in order to receive the latest updates.

For more information, please contact Robert Fellner at 559-462-0122 or Robert@TransparentCalifornia.com.

Transparent California is California’s largest and most comprehensive database of public sector compensation and is a project of the Nevada Policy Research Institute, a nonpartisan, free-market think tank. The website is used by millions of Californians each year, including elected officials and lawmakers, government employees and their unions, government agencies themselves, university researchers, the media, and concerned citizens alike. Learn more at TransparentCalifornia.com.

Lack of penalties allows San Diego Unified to disregard state’s public records law

As long as government employees are free to violate the state’s public records law with impunity, Californians will continue to be denied the fully transparent government promised to them under state law.

While California’s Public Records Act declares that governmental transparency is a “fundamental and necessary right of every person in this state,” the realization of this promise is severely undercut by the lack of any penalty for government officials who blatantly violate the law.

As a result, some agencies are comfortable ignoring the law entirely, adopting what can only be described as a “well, sue us” mentality.

This was the tactic employed by the Los Angeles County West Vector Control District — a local government funded through a supplemental fee included on residents’ property tax bill.

Beginning in 2014, TransparentCalifornia.com requested the district’s pay data as part of its effort to populate the site with the salaries of every government employee in the state.

Despite state law mandating a response within 10 days of its receipt, the district ignored the request and numerous follow-ups for years. Remarkably, even a certified mail letter warning of imminent legal action failed to elicit a response from the district.

It was only after a lawsuit was filed did the district finally acknowledge the request — at which point they provided all of the requested data just a few days after the suit was filed.

But shouldn’t the right to a transparent government apply to all Californians, and not just those with the time and resources to pursue costly litigation?

And it’s not just the smaller agencies who behave this way, even the massive San Diego Unified School District routinely flouts the provision of the law that requires “prompt” disclosure of public records.

Take Transparent California’s most recent request for salary data from the district as an example.

On June 12, the District replied and asserted that they would need approximately three months’ time in order to provide the requested information.

Yet the file that was ultimately provided was marked as being created and last modified on June 6 — indicating it had been in the school’s possession the entire time! An inquiry asking if it was normal policy for the school to delay production of readily available, existing records for nearly three months went unanswered.

In addition to violating the law, such unjustified delays are particularly troubling given the District’s recent adoption of a policy whereby it deletes all emails after only a year — creating a scenario where potentially responsive records could be deleted and withheld from a requester, purely as a result of the school’s habitually delayed response time.

Sadly, examples of governments flouting the mandates of California’s Public Records Act are much greater than the few mentioned here, which is why Assemblyman Rob Bonta, D-Oakland, sponsored AB1479 last session.

The bill would have allowed a court to impose a penalty of between $1,000 and $5,000 — paid directly to the requester — when a government unlawfully denied access to public records. While the fees were far too small to be a truly effective deterrent, it was still a step in the right direction. Unfortunately, despite having passed the Assembly by a 71-1 landslide, lobbying by government unions led to the bill’s functional demise in the Senate, where every word of the penalty provision was erased.

If the promise of a truly transparent government is ever to be realized, the Legislature has only one path forward: adopt the same approach for how private citizens are treated and impose penalties on those who violate the law.

In North Carolina, government employees who knowingly violate the state’s public records law can be held personally liable for the requester’s legal fees — a mechanism which ensures that all residents receive the fully transparent and accountable government they are entitled to.

The California Legislature should adopt a similar provision here.

There’s always been something unsettling about granting public officials immunity from crimes and other wrongdoing — but the case for immunity is particularly weak when it comes to those who intentionally deny Californians their “fundamental and necessary right” of a transparent government.

Indeed, much of the justification for granting government the power of taxation is the notion that those funds are used to serve the public in both a transparent and accountable fashion. Allowing government employees to freely ignore their obligations in this regard threatens to undermine that entire edifice.

The California Legislature put together a nearly perfect public records law. Now it just needs to make sure it’s actually followed.

Robert Fellner is research director at TransparentCalifornia.com — the state’s largest public pay and pension database — where he has made or overseen more than 10,000 public records requests to over 2,500 unique California governments. A condensed version of this commentary was first published in the OC Register.

Top LA County Pension Passes $400,000 Mark

The top pension payout at the Los Angeles County Employees’ Retirement Association (LACERA) has eclipsed $400,000 for the first time ever, according to just released public pension data.

Today, Transparent California released 2016 pension payout data for the city and county of Los Angeles, as well as the San Diego City Employees’ Retirement System (SDCERS).

Former Harbor-UCLA Medical Center chief physician Charles Mehringer’s $403,375 pension was the first time the $400,000 threshold was broken at LACERA. The next 3 highest LACERA pension payouts went to:

  • Retired sheriff Leroy Baca: $334,978.
  • Retired UCLA medical center chief physician Robert Morin: $326,278.
  • Retired sheriff Larry Waldie: $325,554.

The top three Los Angeles City Employees’ Retirement System (LACERS) payouts went to:

  1. Retired personnel department general manager Margaret Whelan: $237,451.
  2. Retired harbor department general manager Bruce Seaton: $236,530.
  3. Retired harbor department port pilot Michael Owens: $234,159.

San Diego

Former fire battalion chief Benjamin Castro’s $885,848 payout topped the SDCERS list — $816,760 of which came from the controversial deferred retirement option plan (DROP). DROP allows an employee to draw a salary and pension simultaneously for up to 5 years, with each year’s pension being deposited into an interest-bearing account. Upon actual retirement, the accumulated balance can be withdrawn either as a lump-sum payment or rolled over into an annuity.

The next three highest SDCERS payouts went to:

  • Retired assistant police chief Mark Jones: $797,408.
  • Retired police captain Dawn Summers: $747,843.
  • Retired fire battalion chief Daniel Saner: $727,696.

To view the entire dataset in a searchable and downloadable format, visit TransparentCalifornia.com.

Transparent California is California’s largest and most comprehensive database of public sector compensation and is a project of the Nevada Policy Research Institute, a nonpartisan, free-market think tank. Learn more at TransparentCalifornia.com.

Combined $1 million pay package for Escondido’s city attorney and manager tops state list

Today, Transparent California released previously-unseen 2015 public employee compensation data — complete with names, pay, and benefits — for 379 cities and 42 counties statewide on TransparentCalifornia.com, the state’s largest public sector compensation database.

Escondido city attorney Jeffrey Epp’s $521,204 and city manager Clayton Phillips’ $518,749 total compensation packages made them the state’s highest-compensated city attorney and manager, respectively, and the 2nd and 3rd highest-compensated city workers of the more than 245,000 employees surveyed.

Epp and Phillips benefit from the ability to cash in extraordinary amounts of unused leave, thanks to a contract that provides 10 paid holidays, 20 management leave days, and about a month of vacation each year, according to a recent San Diego Union-Tribune report.

A survey of 16 San Diego County cities, excluding the City of San Diego, revealed that the average full-time city worker received $122,614 in total compensation last year.

The three San Diego County cities with the highest average compensation package for full-time, year round employees were:

  1. San Marcos: $134,555
  2. Santee: $133,009
  3. Carlsbad: $129,402

San Diego City

The average full-time San Diego City worker received $86,335 in wages and benefits, excluding the cost of pension benefits. San Diego did not provide the cost of retirement benefits on an employee level; however the San Diego City Employees’ Retirement System reported an average contribution rate of 62 percent for the 2015 fiscal year, suggesting an average cost of nearly $42,330 per member.

25 San Diego city workers collected over $100,000 in overtime payouts, with overtime spending increasing nearly 6.5 percent city-wide.

The largest overtime payout to a non-safety city worker went to lifeguard Ric Stell, who received $90,230 in overtime on top of a $63,093 salary.

San Diego should follow the lead of virtually every other California city and county by reporting pension costs on an individual, employee basis, according to Transparent California’s research director Robert Fellner.

“There is no excuse for providing incomplete, and consequently misleading, data on government pay packages. San Diego should join the rest of the state and report full compensation values to the public, particularly given that taxpayers must bear this extraordinary cost.”

San Diego County

The County’s top earner — chief administrative officer Helen Robbins-Meyer — received a more than $25,000 salary bump last year to boost her total compensation to $448,008.

Spending on employee compensation at San Diego County increased 6 percent since the previous year, with a nearly 10.5 percent increase in overtime pay. The average full-time, year-round County worker collected $104,021 in total compensation.

Compensation is defined as total wages plus the employer cost of retirement and health benefits. Full-time, year-round employees are defined as those receiving a salary equal or greater to 90 percent of the “annual salary minimum” reported.

To view the entire dataset in a searchable and downloadable format, visit TransparentCalifornia.com.

 

Ousted San Diego Port CEO received over $90,000 a month in 2014

Today, Transparent California released 2014 public employee compensation data — complete with names, pay, and benefits — for the 26 largest special districts in San Diego County, representing over 95 percent of all San Diego County special district workers.

Former Port of San Diego CEO Wayne Darbeau received $613,774 in total compensation for less than seven months of employment, making him the fourth highest-compensated San Diego County special district worker. Despite being fired in July after reports of nepotism surfaced, Darbeau was still permitted to collect a full yearly salary, plus severance pay.

Elected officials betray the public interest by allowing employment contracts like Darbeau’s, according to Transparent California’s research director Robert Fellner.

“It is unconscionable that unethical behavior is rewarded with lucrative severance packages, at taxpayer expense.”

The average San Diego special district paid $121,543 in total compensation for full-time, year round employees.

The three San Diego special districts with the highest average compensation package for full-time, year round employees were:

  1. North County Fire Protection District: $175,138
  2. San Diego County Water Authority: $152,956
  3. Valley Center Municipal Water District: $147,037

Average compensation for full-time employees of San Diego special districts

SanDiegoSDS

The five highest-compensated San Diego special district workers were:

  1. Former Palomar Health CEO Michael Covert: $791,973
  2. Incoming Palomar Health CEO Robert Hemker: $748,998
  3. Tri-City Medical COO Casey Fatch: $633,980
  4. San Diego Unified Port CEO Wayne Darbeau: $613,774
  5. San Diego Metropolitan Transit System CEO Paul Chester Jablonski: $510,753

Compensation is defined as total wages plus the employer cost of retirement and health benefits. Full-time employees are defined as those receiving a salary equal or greater to the “annual salary minimum” reported.

With the addition of San Diego’s special district data, Transparent California now has 2014 compensation data from over 450 special districts statewide, with further special district data to be posted in the coming weeks.

To view the entire dataset in a searchable and downloadable format, visit TransparentCalifornia.com

To schedule an interview with Transparent California, please contact Robert Fellner at 559-462-0122 or Robert@TransparentCalifornia.com.

Transparent California is California’s largest and most comprehensive database of public sector compensation and is a project the Nevada Policy Research Institute, a nonpartisan, free-market think tank. Learn more at TransparentCalifornia.com.