$573 million<\/a>, would have become about $542 million.<\/p>\nBut the impact would have gone beyond one year. The new policy would have created $30 million in savings year after year, reducing the annual payment more than $300 million cumulatively over the next decade.<\/p>\n
The proposal comes during a bull market on Wall Street that has seen stocks surge in recent months and years.<\/p>\n
The board actually voted 6-4 in favor of the policy change on Friday, but it fell just short of approval because seven \u201cyes\u201d votes were required.<\/p>\n
Trustees in favor called the proposal sound and reasonable, while those opposed stressed the value of a conservative approach and the uncertainty of the future.<\/p>\n
San Diego got nicknamed \u201cEnron by the Sea\u201d two decades ago for a pension underfunding scheme, a scenario the pension board has vowed to never repeat.<\/p>\n
Trustee Chris Brewster praised the policy change, stressing that the pension system\u2019s investments have grown at a rate of 7.4% in recent years and are projected by investment consultants to grow by 7.5% in the future.<\/p>\n
Brewster also contends the existing policy is unfair to current taxpayers, forcing them to overpay and allowing future taxpayers to benefit when investment returns end up outperforming the city\u2019s 6.5% estimate.<\/p>\n
\u201cThey should pay what they owe, but we should try to ensure they don\u2019t pay more than they need to,\u201d Brewster said. \u201cI think it\u2019s time to recognize we went a bit too far going down to 6.5%.\u201d<\/p>\n
He\u2019s referring to the city incrementally shrinking its investment estimate \u2013 formally called a \u201cdiscount rate\u201d \u2013 from 8% to 7.75% in 2009, to 7.5% in 2012, to 7.25% in 2014, to 7% in 2017 and to 6.5% in 2019.<\/p>\n
That 6.5% rate is in the bottom quarter of pension systems nationally and near the bottom in California. Of 39 pension systems in the state, 32 use a higher rate, two use a lower rate, and four others also use 6.5%.<\/p>\n
The pension system\u2019s actuary, Gene Kalwarski, told the board that any investment rate between 6.25% and 7% would be \u201creasonable\u201d and financially sound.<\/p>\n
\u201cThere are sound reasons to consider raising the discount rate, and there are sound reasons to maintain it,\u201d Kalwarski said.<\/p>\n
He also agreed with Brewster that an artificially low rate can create injustice that he called intergenerational inequity.<\/p>\n
\u201cYou don\u2019t want one generation of pension system members and taxpayers subsidizing a subsequent generation, or vice versa,\u201d Kalwarski said.<\/p>\n
But four members of the board voted against the proposal.<\/p>\n
\u201cThere have been years when this board has made some very significant decisions that did not turn out well,\u201d said Trustee Roberta Spoon, almost certainly referring to the Enron-by-the-Sea scandal. \u201cI am a strong advocate for leaving it right where it is.\u201d<\/p>\n
Trustee Paul Kaufmann said the growing national debt, uncertainty about the future of artificial intelligence, and other factors made him skeptical.<\/p>\n
\u201cMacroeconomics and the political situation are certainly unsteady at best,\u201d he said.<\/p>\n
Board President Lisa Marie Harris stressed that the future is uncertain.<\/p>\n
\u201cIt\u2019s not about being right or wrong, it\u2019s about being reasonable,\u201d she said. \u201cAnd that\u2019s what we need to be focused on, because there is no crystal ball.\u201d<\/p>\n
The debate about the pension system\u2019s investment estimates came up during discussion of a comprehensive, once-every-three-years analysis of the system\u2019s assumptions and policies.<\/p>\n
That analysis covers everything from investment estimates to future salary hikes for workers with pensions to how long employees will live after retirement.<\/p>\n
In some good news for the system, the analysis determined that the system has been slightly overestimating how long people will live and how quickly workers will retire after becoming eligible.<\/p>\n
Those findings and some others will lower the pension debt by $122 million, shrinking the city\u2019s annual pension payment by $11 million next July.<\/p>\n
Even without those changes, the city\u2019s annual payment next July is expected to be less than the $573 million estimated last March. That\u2019s because the stock market has done better than expected since then, requiring a smaller city contribution.<\/p>\n
The new payment will be announced in January.<\/p>\n","protected":false},"excerpt":{"rendered":"San Diego\u2019s pension board has narrowly rejected a proposed policy change that would have helped the cash-strapped city…\n","protected":false},"author":2,"featured_media":848456,"comment_status":"","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[39],"tags":[28,2558,983,2559,3,147,530,111,2557],"class_list":["post-848455","post","type-post","status-publish","format-standard","has-post-thumbnail","category-personal-finance","tag-business","tag-latest-headlines","tag-local-news","tag-local-politics","tag-news","tag-personal-finance","tag-personalfinance","tag-politics","tag-top-stories-sdut"],"_links":{"self":[{"href":"https:\/\/www.newsbeep.com\/us\/wp-json\/wp\/v2\/posts\/848455","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.newsbeep.com\/us\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.newsbeep.com\/us\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/us\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/us\/wp-json\/wp\/v2\/comments?post=848455"}],"version-history":[{"count":0,"href":"https:\/\/www.newsbeep.com\/us\/wp-json\/wp\/v2\/posts\/848455\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/us\/wp-json\/wp\/v2\/media\/848456"}],"wp:attachment":[{"href":"https:\/\/www.newsbeep.com\/us\/wp-json\/wp\/v2\/media?parent=848455"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.newsbeep.com\/us\/wp-json\/wp\/v2\/categories?post=848455"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.newsbeep.com\/us\/wp-json\/wp\/v2\/tags?post=848455"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}