Don: That's one eye popping chart!

Reminds me that I'm curious about municipal & county high level staff who are often re-hired after retirement and collect pensions (often multiple) + paycheck, thus making far more than actual working employees. There's a lot of funny business in government payroll manipulating.

swell: Right now I am looking into a significant corner of the phenomenon you cite. SDCERS has been very slow to answer my questions. I still have a couple of queries outstanding. Best, Don Bauder

Hi Don, great article, thank you. Since 2007/8, I think some kind of strange accounting (shell games) has kept this problem at bay, and it just keeps getting worse. Black ink is gray, red ink is pink, they just are not accounting for the unfunded and underfunded pensions. It is actually a national contagion.

Darren: Yes, shell games have been going on for some time. Excessive pensions were a huge problem after 2002. The big gains of that year brought scandal, in part because of the falling stock market, and the plunge in the percentage that funds were funded. In 2005, some of the excessive benefits were restricted to those hired before 2005. Best, Don Bauder

Robert Fellner: I agree that percentage to percentage changes are certainly legitimate. That is why I said that the comparison of SDCERA's gain of 1200 percent in the period in question compared with the much smaller statistical gains for inflation, personal income, median household income, and population is absolutely statistically sound.

But in the case of the comparison of SDCERA and CalPERS, I disagree with you, and it's partly because of the vast difference in size of the two organizations. Both are pension funds, and they each deal with different variables related to their memberships. The fund objectives and the incomes of the employees are different.

Otherwise, you did a superb job.You are helping to shed light on the fact that public sector pensions in San Diego are far too high. Public sector salaries AND pensions are too high, for that matter. It really pays to work for the government vs. the private sector, on balance, and your group has done a very good job shedding light on that. Best, Don Bauder

“Public sector salaries AND pensions are too high, for that matter. It really pays to work for the government vs. the private sector...”

Are you saying public sector workers are less valuable than private sector workers? For example: a guy hurls a baseball 98MPH and is paid 10 million dollars for nine months of his labor, but only “performs” once every five days. While another fellow also works nine months, year after year, five days a week, for 30 years enlightening the minds of 30 kids at a time for 80 thousand dollars.
I value his contribution a whole lot more than the hurler’s. In my mind one exploits his God given talents, while the other shares his. One lives a life of luxury and the other gets along as part of the shrinking middle class.

I’ll admit my example is extreme, but it does exist in our culture.

JustWondering: Before the 21st century, San Diego government workers had moderate pay and moderate pensions. The word "public service" meant something. After the 21st century balloonings, local government jobs were extremely desirable -- high pay, high pensions. As a result of the early 21st century scandals, when San Diego became known as "Enron by the Sea," those excessive benefits now only go to employees hired before 2005. Best, Don Bauder

Ronald Stein: I agree that defined contributions are the safe route to go. By and large, the private sector has gone to defined contributions and jettisoned defined benefits. But many public sector employees still get them. Best, Don Bauder

Stephen Douglas: By and large, the blame lies with chronic underfunding resulting from the granting of excessive benefits. However, there can be another cause: the plunging of investment returns. In San Diego in the early 2000s, there was a tragic combining of both factors -- excessive benefits and poor investment returns. The funded ratio plunged. Best, Don Bauder

JustWondering: Yes, but in common with other public employee funds across the nation, San Diego jumped into exotic investments. Remember SDCERA's problems with investing in a hedge fund? Best, Don Bauder

The government workers who benefit the most are the already highly paid. The hourly workers still collects a modest pension. They are not the ones that are abusing the pension system it is those in the management strata. When a raise in pension benefits is negotiated for the hourly worker the percentage increase is applied to all above the worker level. The push to move from defined benefit plans to defined contribution is backed by employers and those who would manage the contribution. The fact is that defined contribution plans are, with few exceptions, bad for workers. The private sector employers are investing in their wealth and leaving their workers facing poverty when they can no longer work.

Alex Clark: I could not agree more with the statement: “defined contribution plans are, with few exceptions, bad for workers.” DC plans originated as tax shelters for high income individuals whose taxes would be substantially lower during their retirement years. Sheltering and deferring income from Uncle Sam’s taxes has always been a game/goal of the wealthy.

But then the lights turned came on, on Wall Street. Millions in fees would be generated by millions of retirement accounts. More than a trillion dollars would be under its control. It was time to lobby Congress and voilá the 401k shifted the burden from corporations pensions to naïve uneducated individual investor. A Titanic sized disaster a decade or so from the boomer iceberg dead ahead.

Bill Sheffler: You were helpful to this column during the terrible period of a sinking funding ratio. I appreciate your comments on actuarial behavior. Best, Don Bauder

Mike Murphy: When government pensions are far too high, of course the people are not getting what they are paying for. Best, Don Bauder

I am confused by the physical order of Bill Sheffler’s, as a former SDCERS actuary, statement above. Is he arguing for or against negative amortization, funding deficits, both or neither?

Or is it me, just finding things Actuarials try to say really difficult (sometimes I think on purpose) to understand.

JustWondering: Bill Sheffler seems to be addressing his fellow actuaries. Maybe he can write back and say if he meant what you surmise he meant. Best, Don Bauder

Stephen Douglas: I will let you and Sheffler battle this one out. Best, Don Bauder

I was in the pension benefit and administration business years ago. Many small businesses had good intentions with setting up their pension plans. The defined benefit plans were usually adopted by doctors groups, lawyers, architects, engineers and other high income earners in private practice.

Sometimes these entities had trouble honoring the pension benefit and would file for relief and turn the pension over to the Pension Benefit Guaranty Corporation.

Many of the defined benefit plans we designed were for “late savers,” individuals who only began making serious money in their 50’s or 60’s. We could design plans that legally allowed them to sock away as much as 70% of their annual income and reduce their taxes substantially. For these individuals, many of their “personal needs” were already satisfied with business deductions; leased car, travel and entertainment, and other allowances. The thing is, these individuals worked hard to build their businesses or practice and did not have an unlimited source of funds or ability to impose taxes.

It has always struck me that public pensions are a recipe for disaster. They are not just a defined benefit plan, but a public defined benefit pension plan with looser regulations than private plans. The unions bargain and fight to keep adding various perks and benefits to these plans. When the money comes up short, rather than look for expenses to cut, they push for tax hikes. We are now at a stage where they not only raise taxes and coming up with new fees, but are also cutting services substantially without any reasonable debate about the mess that the public pensions are becoming.

It takes a lot of problems and long term mismanagement to make a municipality file bankruptcy, but every time they have it has always been about pension obligations.

Ponzi: Many have questions about public sector pensions and, for that matter, unions. I once opposed public sector unions but no longer do. Obviously, public pensions are too high, and that is related to the power of the unions. However, I am so worried about consequences of the horrendous imbalance of the distribution of wealth and income I favor almost anything that helps to right the ship. Best, Don Bauder

Stephen Douglas: Obviously I don't believe the report is misleading or I wouldn't have printed it, and wouldn't have defended the economic analysis. As to "invidious": my editor challenged it, too. A professor when I was in college in the 1950s used it to describe statistical comparisons that are misleading or deliberately twisted to make false assertions as "invidious." Best, Don Bauder

Stephan Douglas: It isn’t the first time, nor will be the last, that Mr. Bauder has schooled us with his extraordinary use of vocabulary. Probably has something to do with his PhD. spouse. But, I am just wondering about dinner table conversations with the Bauder kids. 👨🏻‍🎓

JustWondering: My wife doesn't get the blame for my bombast. Her PhD is in plant ecology. Here long words are in Latin. I began using polysyllabic words in college, particularly at the campus newspaper.

Do any of you remember Sen. Everett Dirksen of Illinois? He was called the "Wizard of Ooze," as lengthy, often indecipherable words rolled from his tongue. He had a low voice and a very smooth delivery. I remember the. Republican convention of 1960, I believe it was, when he was introducing former President Herbert Hoover who was, of course, widely blamed (wrongly to a large extent) for the Great Depression. Intoned Dirksen, "He has been vilified, and drenched in contumely...." Best, Don Bauder

No on Dirksen, but I do remember William F. Buckley, Jr. and have read some of his works which contained many multisyllabic words I had to look up.

Hi Don, thanks for your excellent journalism, as always (we need more of you). Seems like we have just returned to 2007/8/9, at Mach 1.5, in looking at all of this. We seem to now live in a world where journal entries do not require a reversing entry out of period, where ledgers have only penciled entries, and lets say lots of funny accounting principles/standards are used these days. The un- and under-funded pension crisis will be much bigger than the Great Recession starting in 2007. I doubt many of those owed and expecting pensions after years in GOV jobs, will be very happy campers. Of course the former salaries, current pensions and many benefits that GOV workers were accustomed to, was unfair and a fairy tale, something most of us in the private sector could never realize (benefit from). Take care Don!

Don, I read that former Mayor Pete Wilson was actually the God Father of the City's Pension Crisis and had a lot to do with it...Apparently, Wilson and his Administration convinced City Public employees to withdraw from Social Security and rely solely on the promised City pension plan....that turned out to be a very bad bargain for City employees.

City employees did not know that Wilson and a succession of Republican Mayors would fail to allocate the promised City's contributions to the City employees pension plan that the City and employees agreed to. The City vastly under-payed their contributions to the City employees pension plan and diverted money to Downtown establishment pet projects like the Republican Convention and subsidizing billionaire professional sports team owners and their families.

The City issued itself IOUs and promised to replenish the fund every year but did not do it. The value of the skipped contributions that should have been invested by the City Pension plan and it should have been accruing interest increased every year until it was out of control. Then, the economy tanked and the stock market cratered and then the City could no longer hide the shortfalls to the City pension plan.

Then, the Downtown establishment and Republican Mayors and Council, reneged on their deal with City employees, SCAPEGOATED THE CITY EMPLOYEE UNIONS FOR CITY OFFICIALS INCOMPETENCE AND NEGLIGENCE.... It lead the public to believe(falsely) that it was the fault of City Employees and their Union that there was a City "pension crisis"...?!?!?!

It was the gross and utter mismanagement of the City's promised contributions to the City employees pension plan by High level City officials including a succession of City Managers, Mayors and City Council persons plan that lead to the City Pension Crisis.

concernedcitizen77: Yes, Pete Wilson as mayor was greatly responsible for the pension crisis. He was also responsible for the Horton Plaza disaster, which led to more and more and more corporate welfare downtown. Best, Don Bauder

JustWondering: Attorney Conger did an excellent job sorting out the woes -- the wretched excess woes -- of that period. Best, Don Bauder

The Real Abuse of Pensions is in the private sector by large corporations who use the bankruptcy laws to renege on pension deals with their employees...then sucker Uncle Sam and the US taxpayers for bailouts via the US Pension Benefit Guarantee Corporation.

It is a huge scam....Executives mismanage a company then renege on pension deals...Unfortunately, it has been happening for decades...But, Mismanaging Executives and their cronies always find big bags of cash available for their own "golden parachutes"...

Some Airline pilots worked for 30+ years and were contractually promised a nice pension and were scr**** by corporate hotshots running their airlines through corporate bankruptcy multiple times to renege on their pension contract deals...

The issue, in my mind, is not to rip off the public sector workers by bringing them down to the lowest common denominator of flawed private sector pensions.

And, I agree that Executives in government pensions rip off the system also (and blame those who make less than 100K per year when the market tanks or when the promised high returns on investments turn out to be inflated phony baloney numbers created out of thin air to keep everyone pacified by inflated investment projections that often times do not pan out)..

A major issue is why is the private sector allowed to "cheap out" and rip off their employees, renege on their agreements and/or not offer competitive pensions for private sector workers?!?!

Update from California Supreme Court....

City of San Diego messed up royally putting that pension busting measure on the ballot without consulting in advance with the City employees collective bargaining unit(Union) as required by law and their collective bargaining agreements.

City of SD may have to make up payments to later hires that it cut out of the old pension system according to the Court.

The pension law passed by ballot initiative is in serious danger of being totally invalidated.