San Diego as Next Enron
During a recent hearing a pension consultant compared the disastrous situation faced by beneficiaries of the City of San Diego's pension fund with that of Enron's employees. It may not be quite that bad, but there is a $1.1-billion gap between the assets of the city's pension fund ($3.2-billion) and its obligations ($4.3-billion).
Why did it happen? The mayor and his supporters blame the market, saying that portfolio underperformance was unavoidable given how poorly stock markets did these last few years.
Fair enough, except that argument would be more convincing if San Diego hadn't been under-contributing (actuarially-speaking) to its city retirement fund since 1996. A recent study emphasized that point, saying that only 6% of the deficit was due to fund underperformance, the balance was due to underfunding and granting of over-generous pension payouts.
Anyway, the pension problem threatens to empty the city's treasury, so like all good politicians, they set up a study to look at the problem. The report won't be out until June, but I recently saw a draft table of contents showing some possible options. Here it is -- note the "solution" I have circled in blue.
