Lemer on the pension fund problems

A few days ago, the Chronicle ran a letter from local government watchdog Bob Lemer on the continuing municipal employees pension fund problems.

Here are a few key points he made:

The city's June 30, 2005, audited financial statements (the most recent available, as 2006 is still unreleased to the public, a blatant violation of state law) shows the net assets of the employees' pension plans were $6.8 billion, even without receiving the still-to-come huge underfunding makeup payments.

The $6.8 billion greatly exceeded the city's $4.5 billion in net assets, only $2.8 billion of which was invested in the city's true core mission, infrastructure. In fact, the city invests a great deal more in its employees than in its residents - even excluding the under-funded liability to the plans.

[snip]

Instead of depositing the proceeds of the pension bonds directly into the pension plans to cover past underfunding, the mayor has been dumping the proceeds into the city's general fund to cover general operating expenses. This avoids compliance with the total revenue and expenditure cap of the 2004 voter-approved Taxpayer Bill Of Rights amendment to the city's charter.

The city's 2007 budget showed that of the $570 million of pension bonds then considered payable, $470 million would not begin coming due until at least the year 2031, creating total interest costs of $899 million. Who would finance their home with this kind of exorbitant, interest-bearing, backend loading of their loan?

The mayor neglected to point out to voters that when they authorized the pension bonds, they thereby irrevocably committed the city to paying that portion of the unfunded pension liability and forever forfeited any negotiability on that debt.

The entire letter is available in the Chron.com archives here.

Lemer's perspective is always interesting.

Posted by Kevin Whited @ 05/20/07 09:06 PM | Print |

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