Return to Top

Retirement Fund Up 156%, to $13.4 Billion Since the Crash

By Stan Coombs, Director

On July 31, 2019, the invested San Diego County retirement fund stood at $13.425 billion, according to San Diego County Employee Retirement Association Chief Investment Officer, Stephen Sexauer, and had earned .2% fiscal-year-to-date, one month into the 2019-20 fiscal year. He released that Monthly Risk-Return Report on August 15th.

Sexauer also made his usual “Key Observations,” mentioning the July 31st quarter percent interest rate cut by the Federal Reserve Board, the Chairman of the Fed’s remark that this isn’t “the beginning of a lengthy (interest rate) cutting cycle” (although markets are betting on additional cuts in September and October) and that two of the seven members of the Fed voted against the cut.

Sexauer summarized global valuations as “High and Fair Everywhere,” that 2019 global equity markets returned between 9% and 20%, that U.S. bonds returned 5% to 11%, and a 70%/30% global equity/bond portfolio was up 13%. On the other hand, he reported the trade war accelerating, economic growth slowing with manufacturing output plummeting, and corporate profit growth flat. He also said he had promptly invested a recent $543.1 million county retirement contribution, so that the entire fund remains within investment policy targets, “well diversified and liquid.”

That $13.425 billion figure is nearly an incomprehensible number to most of us, and yet wouldn’t be enough to cover all obligations of the county retirement system if they suddenly became due. They won’t. They’ll come due gradually over about 60 years. Nevertheless, we would be short another $3.4 billion if they did come due now, according to the June 2018 Actuarial Valuation and Review. That shortage is euphemistically termed “the Unfunded Actuarial Accrued Liability (UAAL).”

While that may be unsettling for members dependent on retirement benefits, and it isn’t particularly desirable, it isn’t news either. We’ve noted before that temporary funding shortages are part of any defined benefit retirement system that depends in part on fluctuating investment earnings, and described how the UAAL is routinely and methodically paid-off by the County on a formal 20-year amortization schedule. Just this month the County Board of Supervisors approved an unscheduled $17.1 million payment toward that deficit, in addition to the aforementioned $543.1 million normal retirement contribution.

But what may not be obvious is how resilient the retirement fund is.

We have a stellar example arising from the extreme recession of 2008 and 2009. It was a wild ride, watching our retirement fund tank while wondering if there was an answer other than that the fund should stay invested and ride it out.

There had been articles about complicated junk bond schemes that were threatening major banks, and the market became volatile enough in late 2007 to knock the county retirement fund off its $9 billion high, sliding to $8.8 billion by May of 2008.

And then things seemed to collapse. Within nine months, February 2009, the fund dropped 39% further, to a reported $5.45 billion, and raised the UAAL hundreds of millions of dollars. And still, the best advice, stay invested and the fund would ultimately survive. Ten years and seven months later we’re up 146%, to the current $13.425 billion, and about 78.4% fully funded.

But if one traces reported funded levels of the county retirement system since before the crash, the numbers are remarkably even, considering the depth of the recession and the 39% drop, and one of the principal reasons is something called “the smoothing mechanism.” We haven’t talked about the smoothing mechanism recently. Maybe it’s time to do so for a new generation of retirees.

It’s probably best to start with the supposition that it’s better if large government costs (such as the aforementioned $543 million county retirement contribution) and large government revenues are predictable, even when they include sometimes volatile investment earnings, and if not, some mechanism is available to accommodate major variations.

The smoothing mechanism is such a mechanism, an accounting tool used in some form by most defined benefit retirement plans, wherein only 20% of the full value of each year’s investment gains or losses are officially recognized the year they occur, followed by official recognition of the remaining four 20% segments in each of the following four years, until 100% of the year’s gains or losses are officially recognized. The resulting fund total, thus amended, is carefully reported as the “valuation value of assets,” and the fund total without the smoothing mechanism is just as carefully reported, as the “market value of assets.”

As a result, large unexpected gains or losses only gradually impact the fund, and the County avoids large variations from year to year in their retirement contributions that could otherwise have severe budgetary impacts.

And you thought retirement was simple. . . ◾

Return to Top

Open Enrollment for RESDC Benefit Plans

The 2020 Open Enrollment is fast approaching. Around the end of October, you should receive your 2020 RESDC Benefits Guide. This guide lists the benefit plans available exclusively to RESDC members. Plans available include two extremely high benefit level dental plans, two vision plans including a newly enhanced VSP plan, legal, ID shield, pet, travel, accident, hearing aids, and more.

For RESDC members interested in enrolling, the deadline is November 15th. Once you receive your benefits packet, please don’t delay. The deadline for dental enrollments is strictly enforced. If you are currently enrolled in any of the RESDC benefit plans, your coverage will automatically continue for 2020. You do not need to do anything if you are not making changes to your coverage.

At the RESDC Health Fair Picnic, on Wednesday, October 16th, our benefit plans administrator, Pacific Group Agencies, will be in attendance and will be able to answer your questions. ◾

Return to Top

Save the Date!
RESDC Roundup – South County

November 6, 2019, 3:30 pm
Galley At The Marina
550 Marina Parkway, Chula Vista

Our North County Roundup was well attended and everyone had a great time! We are pleased to announce we will be heading to the South Bay area in November, visiting the Galley At The Marina in Chula Vista. The Roundup provides an opportunity to catch up over libations and appetizers with RESDC leadership and fellow members. No reservation required (no host bar, no host food). Come meet with old friends and make some new ones!

Date:  Wednesday, November 6, 2019
Time:  3:30—5:00 pm
Location:  Galley At The Marina
550 Marina Parkway, Chula Vista, CA 91910 ◾

Return to Top

Theatre Outing
Sunday, November 17, 2019 at 2:00pm
Ring Round the Moon at Lamb’s Players Theatre, Coronado

We invite you to join your fellow RESDC members for a Theatre Outing on Sunday, November 17th at Lamb’s Players Theatre in Coronado! We will be attending Ring Round the Moon, a delightful romantic adventure. Identical twins Hugo & Fredrick each meet their match in this intriguing, uproarious and surprisingly wise look at Love and Money. Christopher Fry’s brilliant adaptation of Jean Anouilh’s classic Invitation to the Castle. Age Advisability: This production will be enjoyed by ages 10 and above.

A limited number of group-rate $37 tickets are available on a first-come, first-serve basis for purchase through RESDC (regular price $78). Our Theatre Outing is a popular event. At the time of printing this newsletter we still have tickets, but we cannot guarantee availability. Tickets can be purchased online at: www.resdc.net/events, by calling the RESDC Office at (619) 688-9229 during our hours of Mon-Fri 9am – 2pm, or by mailing the Registration Form and a check payable to RESDC to 8825 Aero Dr. Suite 205, San Diego, CA 92123. Please inform us of any special requirements, e.g. wheelchair or difficulty with stairs.

Tickets will not be mailed. Tickets will be available for pick up from a RESDC representative adjacent to the theatre starting one hour prior to show time.

When
Sunday, November 17, 2019 at 2:00pm
Coronado is a very popular year-round destination. Please give yourself plenty of time to find parking and pick up your tickets from the RESDC representative.

Where
Lamb’s Players Theatre
1142 Orange Ave, Coronado, CA 92118
For directions & parking info, visit https://www.lambsplayers.org/directions-parking-tips

Directions

From East: Follow Intestate CA 94 West to CA 15 South. Follow to Interstate 5 North. Take exit 14 A to Coronado, CA 75 South onto the bridge. After the bridge, use the left 2 lanes to turn left on Orange Avenue. The theatre will on the right, 1/2 mile after the 10th Street light. There’s a drop off zone in the front.

From South: Follow Interstate 5 North. Take exit 14 A to Coronado, CA 75 South onto the bridge. After the bridge, use the left 2 lanes to turn left on Orange Avenue. The theatre will on the right, 1/2 mile after the 10th Street light. There’s a drop off zone in the front.

From North: Follow Interstate 5 South. Take exit 14A Coronado, CA75 South onto the bridge. After the bridge, use the left 2 lanes to turn left on Orange Avenue. The theatre will on the right, 1/2 mile after the 10th Street light. There’s a drop off zone in the front. ◾

Return to Top

Save the Date!
San Diego County Credit Union
Financial Wellness Wednesdays: Breezing Through the Holidays

When:  Wednesday, November 20, 2019, 9 am

Where: San Diego Workforce Partnership
9246 Lightwave Ave., San Diego, 92123

What:   Learn how to responsibly handle the spending pressures and choices of the holiday season. Topics discussed in this presentation include: setting a holiday budget, shopping for gifts and managing other holiday costs.

RSVP:  For more information or to RSVP for this free event, contact Brandon Gentry, at: bgentry@sdccu.com or call: (858) 249-7952. ◾

Return to Top

Recent Events

• County Board of Supervisors Meetings Temporarily Moving to New Location. Effective September 10, 2019, County Board of Supervisors meetings will be temporarily held at the County Operations Center in Kearny Mesa. The meetings typically take place downtown at the County Administration Center, but the building’s Board Chamber is currently closed for renovation. The next several Board meetings are scheduled to take place at the Campus Center Chambers at 5520 Overland Ave., 92123. If you plan to attend, allow for extra time to find a parking space and pass through security screening. The nearest parking structure is located at 5515 Overland Ave. across from the Campus Center Chambers.

• New Case Studies—Enduring Challenges: Examining the Experiences of States that Closed Pension Plans. A new series of case studies released by the National Institute on Retirement Security finds that states that shifted new employees from defined benefit pensions to defined contribution or cash balance plans experienced increased costs for taxpayers, without major improvement in funding. The research also indicates that the move away from pensions cuts employees’ retirement security and that employers may face increasing challenges hiring and retaining staff to deliver public services. To access the research, visit: https://www.nirsonline.org/research/. ◾

Return to Top

Pension Facts
More Criticism of Public Retirement Plans

By Chris Heiserman, Director

Last month I described a brief from an Illinois conservative non-profit advocacy organization that exaggerated public pension statistics to bolster its claim that government retiree benefits in Illinois were too high and a costly burden on taxpayers. While Illinois state retirement systems are some of the most underfunded and troubled in the nation, it only makes matters worse to pile on the criticism with misleading information and disreputable data analysis.

A recurring theme from critics of traditional public retirement plans is that escalating pension costs over the next several years will severely impact local and state government budgets and result in reduced staffing levels and service cuts. Some of these public pension detractors are heralding a recent study from a political science associate professor at the University of California (UC) Berkeley, Sarah Anzia. Her working paper is objectively titled: “Pensions in the Trenches: How Pension Costs are Affecting U.S. Local Governments.” However, a “policy brief” on the study prominently poses the far less objective question: “Are Rising Pension Costs Crowding Out Public Services?”

Professor Anzia proudly describes her effort as a national study on local government pension costs based on 12 years of annual financial reports of 800 cities, counties, school and special districts. She also gathered annual data on local finances and employment from the U.S. Census Bureau for the same years. The analysis she offers in her paper is focused on 442 city and county governments of varying sizes across the country.

Anzia believes she is adding important insight in the field of local government pension costs, posing simple questions that make it easier for the general public to examine the link between public retirement expenses and delivery of services. However, even though she repeatedly admits these governments vary significantly in size, political climate and economic conditions, for some reason she finds it meaningful to compare pension costs and operational budgets in places with stronger and weaker public-sector labor unions. It seems pretty logical that cities and counties in California, with strong collective bargaining histories and above average housing costs and government salaries, will naturally rise to the top of her cost comparisons.

So, the professor’s analysis leads her to these rather dubious “key findings”: Local government per employee pension costs are rising everywhere but most dramatically in California; and most cities and counties are responding to this trend by shrinking work forces rather than seeking more revenue. In a commentary for The Washington Post under the headline “A Silent Pension Crisis Is Eating Away Local Government Services. Here’s What You Need To Know,” Anzia shared these findings based on her “research.”

Not surprisingly Anzia’s “Pensions in the Trenches” study has been referred to in recent weeks by newspapers and media columnists who regularly criticize public retirement plans. The Sacramento Bee cited her data in a story with the headline, “Local Pension Costs Grew In California At Nearly Six Times National Rate, New Data Shows.” Also, CalMatters columnist Dan Walters has cited Anzia’s “new study” and her observation that escalating public pension costs are a nationwide problem. He quotes from her analysis that “shows that as local governments spend more on pensions, they have fewer public-sector jobs to offer…”

“Crowding Out” Public Services

This theme of retiree payments stretching local and state government budgets and “crowding out” basic services is not new with the UC Berkeley study. In the July 2015 NETWORK my column was titled, “The Latest Anti-Pension Buzzword is ‘Crowd-out’”. It described an April 2015 report from the conservative Manhatten Institute labeled “California Crowd-out: How Rising Retirement Benefit Costs Threaten Municipal Services.” The author claimed that local cities and counties would have to cutback basic services like parks, libraries and street maintenance to pay for overly generous government worker benefits and under-funded retirement plans.

In the March 2018 NETWORK I wrote about a working paper from the Stanford Institute for Economic Policy Research (SIEPR) purporting to show the cost of public pensions in California would be more than retirement systems are stating and will severely squeeze government budgets in the years ahead, causing basic services to be curtailed. The report’s title was “Pension Math: Public Pension Spending and Service Crowd-Out in California. 2003-2030.”

Coincidentally (or probably not), each of these self-described academic research efforts were partially, or as Professor Anzia noted in her case, “generously” funded by The Laura and John Arnold Foundation. The Foundation has a well-known conservative bias and penchant for supporting studies all over the country that focus on the increasing cost of public pensions and underfunded liabilities of many traditional public retirement plans.

Authors of these studies blithely assume that increasing revenue to pay for either rising pension costs or to cover the existing or growing tab for public services will be too unpopular to consider a viable option. That allows them to draw a direct zero-sum correlation and trade-off between retirement benefits promised to government workers and funding operational budgets (jobs). It’s not hard to guess the underlying motive for this simplistic “crowd-out” scenario: the evil culprit is, of course, those public pensions and something should be done about them. Fortunately, there are legal protections associated with retirement benefits earned by public workers; and when given a chance to vote, more often than not, citizens opt for fairness and find much more value in the public service of government retirees than these conservative traditional pension naysayers. ◾

Return to Top

NEW LOCATION for 2019 Holiday Luncheon
DoubleTree Hotel Mission Valley Hazard Center

When: Thursday, December 12, 2019, 11:00 am – 2:00 pm
Lunch is served at 11:30 am

Where: NEW LOCATION: DoubleTree Hotel Mission Valley Hazard Center
7450 Hazard Center Dr., San Diego, CA 92108
Driving directions will appear in the November and December NETWORKs.

Menu: Roast Turkey or Vegetarian Lunch

Cost: $24 per person

Program: President’s Welcome, introduction of guests, approval of the 2020 budget, and music performed by Silverwood Quartet, a premier music ensemble.

Registration:

Registration forms and payment must be received in the RESDC office by Thursday, December 5th. There are no refunds for cancellations after December 5th.

Reserved tables will be provided only for groups of ten who pay for the entire group with one check or one credit card. No exceptions.

If wheelchair seating is required, please call our office at (619) 688-9229, or you may inform us on your registration form.

Name badges and opportunity ticket packets should be picked up at the check-in table at the event. They will not be mailed.

• Register Online: Go to www.resdc.net/events and click the green “Register” button. Use the email associated with your member account. Click “Add guest” to add additional registrants for $24 each. To pay for yourself and guests, click “Pay Online” and pay with credit card.
• Register by Phone: Call the RESDC Office at (619) 688-9229 during our hours of 9 am – 2 pm Mon-Fri.
• Register by Mail: Fill out the Registration Form. Make a check payable to RESDC for $24 per person. Mail registration form, along with check to RESDC, 8825 Aero Dr., Suite 205, San Diego, CA 92123 ◾

Return to Top

Join Team RESDC in 2019 Walk4ALZ San Diego
October 19, 2019

By Laurie Pennington, Member

I am honored to be once again asked to act as the team captain for Team RESDC for the 2019 Walk4ALZ in Balboa Park.

Today more than 84,000 San Diegans live with Alzheimer’s Disease, and another 200,000 care for them locally and I’m sure it’s touched your loved ones as well. It’s made its way into our family and in July, we lost David Martin, age 75. It is very emotional watching someone we love lose their memory and struggle with day to day simple tasks and conversations!

Last year, Walk4ALZ non-profit raised $650,000 and 100% of all funds raised stayed in San Diego. Yes, it stays in San Diego to help San Diego residents. Team RESDC raised over $1,200 in 2018 and we’re hoping to exceed that total and we hope to have team walkers too.

I’m very excited to once again have my now 11-year-old grandson, Franco, joining me on the walk and we hope that you’ll consider bringing your kids and/or grandkids to introduce them to the wonderful experience of walking for a cause to help others.

We hope that you’ll consider joining Team RESDC on Saturday, October 19^th at 8 am in Balboa Park for the biggest and best Alzheimer’s walk ever. Simply visit the link provided below, and sign up to walk with us and raise donations.

To register, simply visit the Team RESDC Walk4ALZ team page at: www.resdc.net/community-events to join my team. If you’re unable to participate, please consider making a $35 donation to our team fundraising campaign.

Team RESDC walked in the Walk4ALZ in October 2018.

Let’s make this year the last year anyone must go through Alzheimer’s with no hope of a cure! Help to stomp out Alzheimer’s. It starts with each one of us, helping – either by walking and raising monies, or just donating!  Thank you!

Walk4ALZ 2019 – Balboa Park:

Date:  Saturday, October, 19, 2019

Where:  Balboa Park, start near the corner of Park and Presidents Way.  2131 Pan American Plaza, San Diego, CA 92101

Registration and Check-in at 6:30 am. Walk at 8:00am. ◾

Return to Top

Annual RESDC Health Fair Picnic

When: Wednesday, October 16, 2019, 10:00 am—1:00 pm
Lunch Served 11:30 am—12:30 pm

Where: Admiral Baker Field, 2400 Admiral Baker Rd, San Diego, 92124
Driving directions will appear in the October NETWORK.

What: 20+ resource booths, picnic lunch, and opportunity drawing. This is an outdoor event. Information available about: Ameritas Dental, Cigna Dental, Health Net, Kaiser Permanente, Pacific Group Agencies, Inc., San Diego County Credit Union, United HealthCare, and My Senior Health Plan.

Menu: Barbecued beef, baked beans, green beans, fruit, coleslaw, rolls, beverages, and dessert.

Registration:  EVERYONE, INCLUDING MEMBERS, MUST REGISTER IN ADVANCE
This ensures we order enough food for everyone and are in compliance with the policy of Admiral Baker Field to not complete financial transactions onsite. Thank you for your cooperation!
RESDC Members:  $0
Non-Members:  $5
Spouses, guests, retirees who have not joined RESDC, etc. are required to  pay $5 each.

Registration forms and payment must be received in the RESDC office by Friday, October 11. There are no refunds. Name badges and opportunity drawing tickets should be picked up at the Check-In table. They will not be mailed. No pets are allowed except Service Animals. No smoking or vaping.

Choose Registration Method:

• Register by Phone: Call the RESDC Office at (619) 688-9229 during our hours of 9 am – 2 pm Mon-Fri.
• Register by Mail: Fill out the Registration Form. Make a check payable to RESDC for $5 per non-member in your group. Mail form and check (if applicable) to RESDC, 8825 Aero Dr., Suite 205, San Diego, CA 92123.
• Register Online: Go to www.resdc.net/events and click the green “Register” button. To access the free RESDC member price, use the email associated with your member account. Click “Add guest” to add non-member attendees for $5 each. To pay for non-member attendees, click “Pay Online” and pay with credit card; otherwise, click “Confirm.” To add another RESDC member, please call RESDC at (619) 688-9229.

Directions: Take Route 15 and exit east onto Friars Road. Turn left on Santo Road, right on Admiral Baker Road, and right at the stop sign. Upon entering the park, there will be signs to direct you. ◾

Return to Top

Welcome New Members

Alfredo Aguirre* – Health & Human Services
Mary E. Bane – Superior Court
Sandra Crespo – District Attorney
Margaret O. Green – Health & Human Services
Macario A. Labrido Jr. – General Services
Imelda S. Maniquis – Land Use & Environmental Grp.
Paul J. Mehnert – County Counsel
Holly A. Mitchell – SDCERA
Robert J. Mitchell – Sheriff
Joanne O. Ososkie
Cathi A. Palatella – Health & Human Services
Monica R. Scott – Health & Human Services
Ester B. Siscon – Sheriff
Anthony D. Stanley – Public Works
Cesar Sumar – Health & Human Services

*Associate Member

The surviving Spouse of a member is eligible for RESDC membership. For enrollment assistance, please call: (866) 688-9229. ◾

Return to Top