By Michelle Durand, The Daily Journal -
County officials disagree with the majority of a civil grand jury’s conclusions about its pension plan and will not implement recommendations made in a report that estimated more than $2 billion in unfunded liability, according to the legally required response.
However, not every facet of the response “SamCERA’s Unfunded Liability: The Elephant in the Room,” was met with opposition.
The Board of Supervisors does agree there is no assurance the San Mateo County Employees Retirement Association’s strategy change to include alternative investments will produce better returns or reduce risk. The board also agrees that financial reporting on SamCERA in the county’s annual financial report can be better and that it hasn’t yet committed any of its Measure A sales-tax revenue to paying down the liability.
Other than that, the formal response by County Manager John Maltbie coming before the Board of Supervisors for approval Tuesday is a laundry list of disagreements.
Along with estimating the unfunded liability at twice what the county reports, the April civil grand jury report concluded that elected officials have failed to monitor or significantly reduce retirement costs. The report also found the association lost more than $11 million on its investments for fiscal year 2012 and on average has failed to achieve its assumed rate of return over the past one-, five- and 10-year periods.
Maltbie wrote in his response that the county has closely monitored SamCERA’s investment policy, even exceeding funding requirements for the last two years, and is paying down the unfunded liability at a faster rate than anticipated by contributing an extra $11.5 million in fiscal year 2011-2012.
As for the estimates of that liability, Maltbie wrote that the Governmental Accounting Standards Board prevents SamCERA from using the same calculations as the grand jury which is why the figures differ.
The response also fights the jury’s conclusion that SamCERA’s investment performance the last decade is poor, instead calling it “commendable” at 7.6 percent because of the widespread losses suffered by other funds in the wake of the shaky economy.
The response also partially disagrees with the jury’s conclusion that county taxpayers rather than SamCERA’s beneficiaries bear the economic burden of its performance because tax increases or slashed county services pay for the unfunded liability. Maltbie wrote that in addition to tax revenue, retirement costs are funded by member contributions and investment earnings.
In addition to opposing most of the jury’s findings, the official county response also bristles at a number of recommendations. Among those, the Board of Supervisors will not formally review SamCERA’s investment performance in an open meeting every quarter. The idea is “unreasonable,” the response states, adding that SamCERA CEO David Bailey is available to attend Board of Supervisors’ meetings and the website posts information including reports. The response also shoots down the suggestion of more highly prioritizing the unfunded liability over new or expanded programs. Doing so could limit essential services to the county’s most needy residents, the response concludes.
The response does agree to bring public pension accounting more in line with the private sector rules and states the county has already implemented the recommendation to appoint to the Board of Retirement only individuals with substantial experience in financial analysis and management.
The civil grand jury reports carry no legal weight although recipients are required to respond in writing within 90 days.
The Board of Supervisors meets 9 a.m. Tuesday, July 9 in Board Chambers, 400 County Government Center, Redwood City.
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