The Ticking Pension Bomb On May 15, 2012, Encinitas Treasurer Jay Lembach presented the City’s pension status to the City Council. He stated that pensions are underfunded by $16.2 million. That statement is false.
It turns out Lembach’s $16.2 M figure represents only one of the City’s four pension plans: “miscellaneous employees.” He excluded the plans for firefighters, lifeguards, and San Dieguito Water District employees. Firefighters are among the City’s most highly paid and pensioned employees. To exclude their underfunded pensions from the City’s reported total is willful deception.
The “miscellaneous employees” plan had assets of $36.5 M and liabilities of $61.7 M when Lembach reported its status.
To most people, 61.7 minus 36.5 equals 25.2, not 16.2. Lembach’s questionable math apparently assumes the $36.5 M in the account is really worth $45.5 M. At best this is a fantasy valuation that produces $9 M out of thin air. In his report, Lembach neither discloses nor explains why he used hypothetical rather than real assets.
An independent analysis by Charlie McDermott of the Encinitas Taxpayers Association shows the total unfunded pension liability is closer to $70 M — and growing.
McDermott calculated the $70 M figure using the California Public Employees’ Retirement System’s (CalPERS) future-return assumptions. He believes, and we agree, that the CalPERS assumptions are excessively optimistic.
More realistic assumptions for return on investments would push the shortfall to well over $100 M. For some perspective on that amount, $100 M is more than the combined bond debt the City has assumed to buy the Hall property, to build the park on the property, and to build the library and fire stations.
On several occasions, Encinitas citizens have publicly asked the City Council for honesty and transparency regarding the City’s unfunded pension liabilities. Mayor Jerome Stocks has repeatedly shrugged off these requests, with flippant remarks to the effect that CalPERS, not the City, is responsible for the calculations, and that the City just pays the CalPERS monthly bills. Stocks’ public position on the pension trouble is the equivalent of our repeatedly making minimum monthly payments on our credit card, ignoring the large and growing balance, and continuing our shopping sprees.
The City’s combined employer and employee pension payments to CalPERS are more than $6 M annually. That’s about 11% of the budget.
The longer we put off being honest about our liabilities, the greater the eventual cost will be. – Encinitas Taxpayers Association
From the new edition of the Hoodlink.