continued Gleason and Wood point out that city workers who enjoy DROP and other indulgences are hurting current retirees, who do not have benefits anywhere near as good. One reason is that current retirees get additional payments, such as the so-called "13th check," as a result of past lawsuits. But those extra benefits don't come through if the pot is underfunded, as it is now -- deliberately. It's "reverse Robin Hood," says Gleason.
Also last November, the council agreed to effectively indemnify the retirement board against lawsuits over the quid pro quo. Attorney Michael Aguirre says that under California public policy, a body cannot be indemnified so that it can breach its fiduciary duty. "The trustees of the retirement board could be facing potential criminal liabilities," says Aguirre.
Larry Grissom, chief executive of the retirement board, and Frederick W. Pierce IV, president, dispute the critics' complaints. For one thing, DROP is not double-dipping, they claim. "It would be the same thing in substance if they retire from the city and go to work somewhere else," insists Grissom. Hmmm.
They both refuse to comment on charges of retirement-board conflict of interest and deliberate underfunding in return for higher benefits on the grounds that these matters are under litigation.
They blame bear-market losses for most of the underfunding problems and assert that retirement benefits are not threatened. They think that talk of city bankruptcy or asset sales is folly. "Pursuant to the contribution agreement with the city, by 2009 the city will be contributing at a rate that will be sufficient to fully fund the system," says Grissom, although the deficit will likely be substantial. In 2009, "The deficit will be being fully amortized by industry standards," he asserts, acknowledging that this is not true today.
But, says Michael Conger, the attorney handling the lawsuits of Gleason and Wood, "The actuary says that city payments will ramp up over five years by $150 million to $200 million a year. But where is the money going to come from? They have never answered that question."
There are many suggestions. All critics agree the city must begin funding the system now. Shipione says San Diego should require a citizen vote if city-worker benefits are to be raised, as San Francisco does.
Retired superior court judge Larry Stirling says heads should roll at City Hall, traffic fines should go toward the funding problem, unfunded benefits should be revoked, and many other things. The whole disgrace is a "gift of public funds" under state law -- a felony. He further defines that felony: "megatheft."