Focus On S.D. Pension Fund
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April 9, 2010 – We discuss two court rulings in San Diego's city pension cases.
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GLORIA PENNER (HOST): Major developments this week in the ongoing saga surrounding San Diego’s pension fund. Federal charges were dismissed against five former city officials and pension board members for an alleged deal to underfund the pension system in exchange for increased benefits. And a state court rule that San Diego doesn’t have to pay another $177 million into the pension system. KPBS reporter Alison St John joins me now to explain, welcome Alison. ALISON ST JOHN (Senior Metro Reporter): Glad to be here Gloria. PENNER: Alright help us understand the financial obligations connected to the pension fund. We have a graphic to help explain how it all fits together. ST JOHN: So basically the fund does actually have liabilities of $6.3 billions as we see there at the top. But what is actually in the fund? $4.2 billion. So that means there’s $2.1 billion that the city does not have to meet its long term liabilities over time. Now the green figures are in fact more important because that what the city has to pay in every year. $232 million is what it’s going to be paying in the next year. And the bottom figure relates to this lawsuit that just got settled this week. PENNER: Alright so we don’t have to pay the $177 million. What’s the significance of that? ST JOHN: Well as you can imagine it is a huge sigh of relief the city has just avoided a bullet in a way. That $177 million would have had to been paid on the spot to the pension fund if they had won the suit. However, the judge said that previous lawsuits in fact precluded them from arguing that the city owed them money to the pension fun. PENNER: That’s good considering that the city is wrestling with the big deficit periodically. Let’s talk about the federal charges that were dropped against those five pension and city officials. First of all what were they accused of doing? ST JOHN: Well they were accused of denying the public their right to honest services, the federal law under which they were being accused by the U.S. attorney’s office. PENNER: And why were they acquitted? ST JOHN: Well we should also perhaps explain the reason they were being challenged was because of that whole situation back in 2002, where they proposed a plan to underfund the pension plan at the same time as increasing benefits. So they were acquitted because Judge Benitez, the federal judge, said that the federal law is actually too vague for them to really be able to see how what they were doing might have been denying the public fair services. So essentially it’s saying, what they say is vindicated. That they were just doing their job they were representing the interests of their constituents on the pension board and this was a deal that they were presenting at the city council, so the charges didn’t stand. PENNER: Do you expect there will be an appeal of any sort? ST JOHN: Well, at the moment the U.S. attorney’s office has until May 6 to decide. So they are considering that, whether to go ahead with that or not. PENNER: Well what conclusion should we the public draw from the fact that these charges were dropped or dismissed? ST JOHN: It’s so interesting because you know for years we’ve seen news stories about the scandal that appeared to be and there was talk of conflict of interest and Michael Aguirre tried to roll back the benefits. And now we’ve come to the point that both the state supreme court and the federal court have exonerated all of the people who were indicted in that case. The city council people who also voted on it were charged with negligence only. So nobody so far, except Ron Saathoff is still on the hook for some personal benefits he got from the whole deal. Otherwise, nobody is being help accountable legally for this, although there have been many many ramifications. PENNER: And what’s next for Ron Saathoff? ST JOHN: Well Ron Saathoff is - they’re going to bring him back to look at dates for a possible trial in May also. PENNER: Ok, now I think the big question is what’s the connection between either of these rulings and assurance that problems such as the underfunding of the pension system won’t happen again? ST JOHN: Well there have been a huge number of reforms done at the city, Gloria, I mean they have done so much in terms of changing the makeup of the pension board, beefing up the audit committee. So there have been a lot of reforms. However, the underlying concept of what happened there which was to push a dept into the future. There’s really nothing to protect the public from that and in fact what we just saw very recently with the city council agreeing to push $185 million debt further ahead into the future in order to save money now. That same strategy is still there and I think the public has not really gotten any guarantees that something, not the same, but similar, might not be still in the works. PENNER: Well thank you very much Alison St John. ST JOHN: Thank you Gloria.