Santa Barbara Auditor must be held Accountable. Pension Fund Fraud may reach 1 Billion Dollars

Below in this posting as it appears on my Blog it will contain the missing Data I brought into question from the “White Paper” our Santa Barbara County Auditor Robert Geis released in 2006. Oddly enough you will not find any reference to this important information at our Santa Barbara County web page http;//www.countyofsb.org/sbcers or Mr. Geis’s ‘White Paper’ document. A “white paper” is an authoritative report or guide that often addresses issues and how to solve them. White papers are used to educate readers and help people make decisions. They are often used in politics, business, and technical fields. In commercial use, the term "white paper" has also come to refer to documents used by businesses as a marketing or sales tool. The mere fact Mr. Geis labeled his document the ‘White Paper” in 2006 shows us there were problems that had to be addressed in regards to the performance of our Billion dollar Pension fund. One must remember that the several Mercer reviews of our Pension Fund in the past have been highly critical of our County’s actions or lack of. The Santa Barbara County’s consistent efforts to release confusing non transparent audits seams to be continued in the 2006 ‘White Paper’. I feel that document was an unsuccessful attempt to explain the turmoil in our Santa Barbara County handling and performance of the Pension Fund. Now since the data from 2001 was obviously available to our County Auditor while creating the “White Paper” why would he fail to include the 2001 information that one would be needed to properly comprehend his efforts in representing the funds actual value? With these and other past efforts his actions and the non actions of the seated Santa Barbara Board of Supervisors one has to wonder did that and past actions create a criminal act of Misrepresentation of Government Funds, Fraud, Embezzlement, how can one tell ? You may review the file from 2001 in it's original PDF format @ http://www.countyofsb.org/sbcers/fnp/sbcers2002.pdf

It may interest you to know that our County residents are following along with every blog subject I post and seam to be doing there own research on Google. Below is a list of search’s I briefly ran this morning on Google and they all produced a very alarming result. With each search result I found there was one common denominator. It seams that almost all of the web pages listed in regards to a subject search had a Star behind it. This action by the Google search engine indicates that the web page in question has achieved a higher level of recent hits and viewing. Now keep in mind that all the subject matters in my brief search are directly related to Santa Barbara, Good Hunting!
Santa Barbara county property taxes collected 2009
Santa Barbara county fraud in real estate
KPMG SBCERS
Santa Barbara judicial misconduct

I have posted the entire 2001 2002 audit on my blog today as well. Please take notice that the two years are combined in this audit making it almost imposable to delete 2001 from the 2006 “White Paper’.
http://www.santabarbaracriminalcourtcorruption.blogspot.com

I will leave you with two more concerns I have. How many different firms such as Mercer, KPMG and even a local Santa Barbara law office failed in there fiduciary responsibilities in regards to there review of our County Pension and the actions behind its miserable performance? An if this is found to be true what is the financial liability owed the Santa Barbara County Tax Payers? When you review KPMG you might be surprised to see that they have a proven track record in regards to being sued for unethical actions. Be it from the I.R.S., or other Funds like our Pension crisis right here in Santa Barbara. Here is the other extremely alarming fact I uncovered yesterday. If you have the interests go to this SEC web page. http://searchwww.sec.gov/EDGARFSClient/jsp/EDGAR_MainAccess.jsp
Than type in KMPG in the search box and you will get
http://searchwww.sec.gov/EDGARFSClient/jsp/EDGAR_MainAccess.jsp?search_text=KMPG&isAdv=false

So let’s finish my thought about the search results that alarmed me in connection to KMPG and our world economy. Amongst the quite numerous results and documents that were supplied by Wall Street, I was just shocked to see how many World Funds are rushing to obtain the fourth largest U.S. auditing firms services. When you take into consideration the amount of litigation both past and current that KMPG has or is involved with one has to wonder how they keep there license or credentials which ever is required to be considered an ethical source for there accounting and or auditing services? Having shared that and remembering Santa Barbara’s current pension crisis and KMPG’s possible involvement here is another concern. Is our County Pension fund currently investing in any fund domestic or aboard that depends on the auditing services of KMPG and if so why? Our Pension fund has diversified this past decade to many investments abroad and one must question if that is just a ploy to keep in business with the same Good Old Boys, in a stealth manner. Now mind you this must be happening all across our Country and is just further abuse of our Financial Markets that we all must pay for.

Much more on Wall Street will follow in future postings. As always I only ask that if you found some value in my posting that you please share it with others.




Larry Mendoza




The Missing Audit
A Pension Trust Fund of the County of
Santa Barbara, California
COMPREHENSIVE ANNUAL
FINANCIAL REPORT
For Fiscal Years Ended
June 30, 2002 and 2001
Issued by:
Gary L. Feramisco, Treasurer/Retirement Administrator
Deborah Fernamburg, Financial System Analyst
105 E. Anapamu St. Room 301
Santa Barbara, CA 93101
Table of Contents
1 INTRODUCTION
2 GFOA Certificate of Achievement
3 Letter of Transmittal
7 Organization Chart
8 Board of Retirement
9 List of Professional Consultants
11 FINANCIAL SECTION
12 Independent Auditors’ Report
14 Managements Discussion and Analysis
18 Statements of Plan Net Assets
19 Statements of Changes in Plan Net Assets
20 Notes to Financial Statements
Required Supplemental Information
32 Schedule of Funding Progress
32 Schedule of Employer Contributions
33 Notes to the Schedule of Funding Progress and Employer Contributions
Other Supplemental Information
34 Schedule of Administrative Expenses
35 Schedule of Investment Fees
35 Schedule of Payments to Consultants
37 INVESTMENT SECTION
38 Investment Consultant Letter
39 Outline of Investment Policies
40 Performance Results
40 Asset Allocation
41 Schedule of Top Ten Equity and Fixed Income Securities
41 Schedule of Professional Fees and Service
42 Investment Summary
43 ACTUARIAL SECTION
44 Actuary’s Certification Letter
45 Summary of Actuarial Assumptions and Methods
49 Schedule of Active Member Valuation Data
50 Short Term Solvency Test
50 Schedule of Retirees and Beneficiaries Added to and
Deleted from Retirement Payroll
51 Summary of Major Plan Provisions
55 STATISTICAL SECTION
56 Schedule of Additions by Source
56 Schedule of Deductions by Type
56 Schedule of Participating Employers
57 Schedule of Average Benefit Payments
58 Schedule of Retired Members by Type of Benefits
59 GLOSSARY
60 Glossary
i ♦ SBCERS 2002 Annual Report

INTRODUCTION SECTION
- Certificate of Achievement
2 ♦ SBCERS 2002 Annual Report
INTRODUCTION
- Letter of Transmittal
GARY L. FERAMISCO EMPLOYEES' RETIREMENT SYSTEM
TREASURER-ADMINISTRATOR
105 E. Anapamu St., Room 301, Santa Barbara
Bernice James Telephone (805) 568-2940
Assistant FAX (805) 568-2487
Mailing Address: 511 E. Lakeside Parkway, Santa Maria
Post Office Box 2490 Telephone (805) 346-8338
Santa Barbara, CA 93120-2490 FAX (805) 346-8331
September 18, 2002
Santa Barbara County Employees Retirement System
Board of Retirement
105 E. Anapamu St., Room 301
Santa Barbara, CA 93120
Dear Board Members,
It is with pleasure that I submit the Santa Barbara County Employees’ Retirement System (SBCERS) Comprehensive
Annual Financial Report (CAFR) for the fiscal years ended June 30, 2002 and 2001, the systems 59th year of
operation. The report is intended to provide users extensive and reliable information for making management
decisions, determining compliance with legal provisions, and determining responsible stewardship of SBCERS.
Like all institutional investors, the System’s returns were down in the fiscal year 2002 in light of last year’s
dramatic correction in the stock market. While returns were down the system outperformed its benchmark. The
System remains strong, well funded and well positioned to serve our members. The Board of Retirement (Board)
continues to demonstrate its commitment to provide accurate and timely service to our 4450 members and 2242
benefit recipients into the future.
The Comprehensive Annual Financial Report
Responsibility for both accuracy of the data and the completeness and fairness of the presentation rests with
SBCERS’ management. It is our intent and belief that the enclosed data is accurate in all material respects and is
reported in a manner designed to present fairly the financial position and results of operations of the System. The
report is presented in five sections:
• The Introductory Section contains an overview of SBCERS and its’ organization. This section includes this
letter of transmittal, a listing of the members of the Board of Retirement, the Retirement System organization
chart, and a listing of professional consultants utilized by the retirement system;
• The Financial Section presents the financial condition and funding status of SBCERS. This section contains
the opinion of the independent public accountants, Nasif, Hicks, Harris & Co., Management’s Discussion and
Analysis, the financial statements, and the related supplemental information;
• The Investment Section provides an overview of SBCERS’ investment program. This section contains a report
on investment activity, investment policies, investment results, and various investment schedules;
• The Actuarial Section communicates the Plan’s funding status and presents other actuarial related information.
This section contains the certificate of the consulting actuary, Buck Consultants, actuarial statistics, and general
plan provisions;
3 ♦ SBCERS 2002 Annual Report
INTRODUCTION
- Letter of Transmittal
• The Statistical Section presents information pertaining to SBCERS’ operations on a multi-year basis.
SBCERS AND ITS SERVICES
SBCERS was established on January 1, 1944, and is administered by the Board of Retirement to provide service
retirement, disability, death, and survivor benefits for its employees and contracting districts under the California
State Government Code, Section 31450 (County Employees’ Retirement Law of 1937). Members include all
permanent full and part-time employees of the County of Santa Barbara and the following 9 districts:
Air Pollution Control District
Carpinteria Cemetery
Carpinteria-Summerland Fire Protection
Goleta Cemetery
Oak Hill Cemetery
Santa Barbara Association of Governments
Santa Barbara Coastal Vector Control District
Santa Maria Cemetery
Summerland Sanitary
The Board of Retirement is responsible for establishing policies governing the administration of the retirement plan
and managing the investment of the system’s assets under authority granted by Article XVI of the Constitution of the
State of California.
Article XVI, Section 17(a) provides the Retirement Board has “the sole and exclusive responsibility to administer
the system in a manner that will assure prompt delivery of benefits and related services to the participants and
their beneficiaries.” Section 17(b) further provides that “members of the Retirement Board of a public retirement
system shall discharge their duties...solely in the interest of, and for the exclusive purpose of providing benefits to
participants and their beneficiaries, minimizing employer contributions thereto, and defraying reasonable
expenses of administering the system. A Retirement Board’s duty to its participants and their beneficiaries shall
take precedence over any other duty.”
The Board consists of nine members and two alternates, four of whom are appointed by the County’s Board of
Supervisors, members of the Retirement System elect four, and the County Treasurer is an ex-officio member.
The Retirement System is not a component unit of the County of Santa Barbara as the County is not financially
accountable for the Retirement System.
ACTUARIAL FUNDING STATUS
Buck Consultants, an independent actuarial firm, is hired to conduct actuarial valuations to monitor SBCERS’ funded
status. The System’s funding objective is to meet long-term benefit obligations through contributions and investment
income. The funding progress of the retirement system is calculated in accordance with Government Accounting
Standards Board Statement No. 25 and compares the ratio of system liabilities for benefits earned versus current
value of assets. The funding ratio as of December 31, 2000 was 102.7% using the entry age normal method with a
five year smoothing actuarial value of assets. As of the fiscal year ended June 30, 2002 the net assets were $1.1
billion. More detailed information on methods and funding status can be found in the Financial and Actuarial section
of the CAFR.
4 ♦ SBCERS 2002 Annual Report
INTRODUCTION
- Letter of Transmittal
Triennially, Buck Consultants completes a full analysis of all economic and non-economic assumptions; a
valuation update using statistical information available for members is performed annually. The economic and
non-economic assumptions are updated at the time the triennial valuation is performed. Triennial valuations serve
as the basis for changes in member and employer contribution rates necessary to properly fund the system.
Recommendations are presented to the Board of Retirement for consideration. The last triennial investigation was
performed as of December 31, 2000.
INVESTMENTS
The Board of Retirement has exclusive control of all investments of the retirement system and is responsible for
the establishment of investment objectives, strategies, and policies. Members of the Board serve in a fiduciary
capacity and are authorized to invest in any form or type of investment deemed prudent in the informed opinion of
the Board. External investment management firms manage the assets of SBCERS. Staff and the System’s
Investment Consultant closely monitor the activity of these managers and assist the Board with implementation of
investment policies and long-term investment strategies. The Investment Goals, Policies, and Procedures establish
the investment program goals, asset allocation policies, performance objectives, investment management policies,
and risk control. For the current quarter ended June 30, 2002, SBCERS’ investments provided a –5.2% return.
SBCERS’ annualized rate of return over the last one and three-years is –5.0% and –.9%, respectively. While the
policy benchmark had annualized returns of –8.4%, and 3.2%, for one, and three-year periods. More detail on
SBCERS investment performance and policies can be found in the Managements Discussion and Analysis Report
and in the Investment section of the CAFR.
FINANCIAL INFORMATION
SBCERS management is responsible for the accuracy of the data, the completeness and fairness of the
presentation of financial information, including all disclosures, and establishing and maintaining an internal control
structure designed to provide reasonable assurance regarding the safekeeping of assets and the reliability of financial
records. Nasif, Hicks, Harris & Co., Independent Auditors, have audited the financial statements and expressed
their opinion that SBCERS’s financial statements are presented in conformity with generally accepted accounting
principles and are free of material misstatement.
SERVICE EFFORTS AND ACCOMPLISHMENTS
During the fiscal year SBCERS consolidated its plans while offering an enhanced benefit, 2% of 1-year final average
salary at age 57 for General Members and 3% at age 55 for Safety Members. In summary, all open and closed
general plans were rolled into General Plan V and all open and closed safety plans were rolled into Safety Plan IV.
A 3% cost of living adjustment was granted to every retiree and to every beneficiary who receives a survivor’s
allowance (except General members who retire under Plan II as the plan was not entitled to receive a cost of living
adjustment).
The Board allocated monies for a one-time payment to offset health care costs of retired members whose offset did
not completely cover the monthly premium amount.
The Board adopted enhancements to Other Post Retirement Benefits. Retirees now receive $15 per year of service
toward monthly insurance premiums or $4 per year of service cash benefit.
5 ♦ SBCERS 2002 Annual Report
INTRODUCTION
- Letter of Transmittal
6 ♦ SBCERS 2002 Annual Report
Also adopted was a special COLA for retired members who retired prior to April 1,1978. Retirees will receive
between 2.5% and 30.5% Cost of Living increase to restore purchasing power. This enhancement will be effective in
the 2002-2003 fiscal year
The Ventura Lawsuit was settled, and retroactive and ongoing payments were made to retirees resulting from
increases in final compensation.
The Board is also in the process of obtaining a new Retirement Administrator, independent from the Treasurer (as it
has been in the past). While the new Administrator has not been appointed as of the report date, the new
Administrator is expected to be in place by the beginning of the 2003 calendar year.
CERTIFICATE OF ACHIEVEMENT
The Government Finance Officers Association of the United States and Canada (GFOA) awarded a Certificate of
Achievement for Excellence in Financial Reporting to Santa Barbara County Employees’ Retirement System for its
comprehensive annual financial report for the fiscal year ended June 30, 2001. This was the first year that SBCERS
submitted the report for consideration and received this prestigious award. In order to be awarded a Certificate of
Achievement, a government must publish an easily readable and efficiently organized comprehensive annual
financial report. This report must satisfy both generally accepted accounting principles and applicable legal
requirements.
A Certificate of Achievement is valid for a period of one year only. We believe that our current comprehensive
annual financial report continues to meet the Certificate of Achievement Program’s requirements and we are again
submitting it to the GFOA to determine its eligibility for another certificate.
ACKNOWLEDGMENTS
I would like to express my appreciation for the dedication and efforts of the staff members who contributed to the
preparation of the CAFR. Their combined efforts have produced a report that will enable the Board, the members
and the County to better evaluate and understand the Santa Barbara County Employees Retirement System. I also
want to express my thanks to the Board of Retirement for its dedicated effort and to the retirement staff for its
commitment to SBCERS, a combination that assures the System’s continued successful operation.
Copies of this report are available at the Santa Barbara County Employees Retirement System, 105 E Anapamu,
Suite 301, Santa Barbara, California 93101.
Respectfully submitted,
GARY L. FERAMISCO
Retirement Administrator
INTRODUCTION
- Organization Chart
7 ♦ SBCERS 2002 Annual Report
INTRODUCTION
- Board Members
CHAIR
Rochelle Camozzi
Elected by general members
Present term expires December 2002
VICE CHAIR
Shawn Terris
Elected by general members
Present term expires December 2004
SECRETARY
George Bobolia
Elected by retired members
Present term expires December 2002
TREASURER / MEMBER
Gary L. Feramisco
Member mandated by law
Ex officio
MEMBER
Joni Gray
Appointed by Board of Supervisors
Present term expires December 2004
MEMBER
Norman E. Horsley
Elected by safety members
Present term expires December 2004
MEMBER
Joseph C. Gallas
Appointed by Board of Supervisors
Present term expires December 2002
ALTERNATE MEMBER
Mary P. Cederberg
Elected by retired members
Present term expires December 2002
MEMBER
Kate Silsbury
Appointed by Board of Supervisors
Present term expires December 2003
ALTERNATE MEMBER
Ted Tedesco
Appointed by Board of Supervisors
Present term expires December 2002
ALTERNATE SAFETY MEMBER
Scot Alderete
Elected by safety members
Present term expires December 2004
8 ♦ SBCERS 2002 Annual Report
INTRODUCTION
- List of Professional Consultants
Consulting Services
ACTUARY
Buck Consultants
INDEPENDENT AUDITOR
Nasif, Hicks, Harris & Co
CUSTODIAN
State Street California, Inc
LEGAL ADVISORS
Santa Barbara County Counsel
Rogers & Sheffield
McCarthy & Kroes
Reicker, Pfau, Pyle, McRoy & Herman LLP
INVESTMENT CONSULTANT
Pension Consulting Alliance, Inc
Investment Services
DOMESTIC EQUITY
Alliance Capital Management LP
Alliance Bernstein
Starbuck, Tisdale & Associates
INTERNATIONAL EQUITY
Bank of Ireland Asset Management Ltd
State Street Global Advisors
Nicholas-Applegate Capital Management
DOMESTIC FIXED INCOME
Lincoln Capital Management
STW Fixed Income
Wells Capital Management
GLOBAL FIXED INCOME
Julius Baer Investment Management
9 ♦ SBCERS 2002 Annual Report
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10 ♦ SBCERS 2002 Annual Report

FINANCIAL SECTION
- Independent Auditors Report
12 ♦ SBCERS 2001 Annual Report
Independent Auditors' Report SAMPLE
The Honorable Board of Retirement
Santa Barbara County Employees' Retirement System
We have audited the general purpose financial statements of the Santa Barbara County
Employees' Retirement System as of and for the years ended June 30, 2001 and 2000, as
listed in the accompanying table of contents. These general purpose financial statements are
the responsibility of the Santa Barbara County Employees' Retirement System's management.
Our responsibility is to express an opinion on these general purpose financial statements
based on our audits.
We conducted our audits in accordance with U.S. generally accepted auditing standards.
Those standards require that we plan and perform the audits to obtain reasonable assurance
about whether the general purpose financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting the amounts and disclosures in
the general purpose financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the general purpose financial statements referred to above present fairly, in
all material respects, the financial position of the Santa Barbara County Employees'
Retirement System as of June 30, 2001 and 2000, and the changes in its net assets for the
years then ended in conformity with U.S. generally accepted accounting principles.
Our audits were made for the purpose of forming an opinion on the general purpose financial
statements taken as a whole. The required supplementary information listed in the
accompanying table of contents is presented for purposes of additional analysis and is not a
required part of the general purpose financial statements of the Santa Barbara County
Employees' Retirement System, but is required by the Governmental Accounting Standards
Board. Such information has been subjected to the auditing procedures applied in the audits of
the general purpose financial statements and, in our opinion, is fairly presented, in all material
respects, in relation to the general purpose financial statements taken as a whole. The
information presented in the investment, actuarial, and statistical sections, as listed in the
accompanying table of contents, has not been audited by us and, accordingly, we express no
opinion on it.
FINANCIAL SECTION
- Independent Auditors Report
13 ♦ SBCERS 2001 Annual Report
Independent Auditors' Report
The Honorable Board of Retirement
Santa Barbara County Employees' Retirement System
We have audited the general purpose financial statements of the Santa Barbara County
Employees' Retirement System as of and for the years ended June 30, 2001 and 2000, as
listed in the accompanying table of contents. These general purpose financial statements are
the responsibility of the Santa Barbara County Employees' Retirement System's management.
Our responsibility is to express an opinion on these general purpose financial statements
based on our audits.
We conducted our audits in accordance with U.S. generally accepted auditing standards.
Those standards require that we plan and perform the audits to obtain reasonable assurance
about whether the general purpose financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting the amounts and disclosures in
the general purpose financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the general purpose financial statements referred to above present fairly, in
all material respects, the financial position of the Santa Barbara County Employees'
Retirement System as of June 30, 2001 and 2000, and the changes in its net assets for the
years then ended in conformity with U.S. generally accepted accounting principles.
Our audits were made for the purpose of forming an opinion on the general purpose financial
statements taken as a whole. The required supplementary information listed in the
accompanying table of contents is presented for purposes of additional analysis and is not a
required part of the general purpose financial statements of the Santa Barbara County
Employees' Retirement System, but is required by the Governmental Accounting Standards
Board. Such information has been subjected to the auditing procedures applied in the audits of
the general purpose financial statements and, in our opinion, is fairly presented, in all material
respects, in relation to the general purpose financial statements taken as a whole. The
information presented in the investment, actuarial, and statistical sections, as listed in the
accompanying table of contents, has not been audited by us and, accordingly, we express no
opinion on it.
FINANCIAL SECTION
- Management Discussion and Analysis
This discussion and analysis of the Santa Barbara County Employees’ Retirement Systems financial
performance provides an overview of the financial activities and funding conditions for the fiscal year ending
June 30, 2002. Please review it in conjunction with the transmittal letter (starting on page 3) and the
Financial Statements beginning on page 18.
Financial Highlights
• The plans’ assets decreased by $69.5 Million (or 5.8 %) as a result of the fiscal year’s activities
• The contributions (county and employee), in total, increased by $4.4 Million (or 11.7%)
• Net investment income (including securities lending) decreased by $9.8 Million (or 18.8%) from fiscal
year 2000-2001 to 2001-2002
• Benefit Payments increased by $6.0 Million (or 14.8%) over the prior year
Plan Highlights
• Benefit changes to the plan, effective September 3, 2001 and December 10, 2001 (depending on the
employed members bargaining unit), changed the retirement formula to 2% at age 57 for all general
members, and 3% at 55 for all safety members, while rolling all general plans (except General Plan II,
APCD I and II) into General Plan V, and all safety plans into Safety IV
• Increases in the Post Retirement Health care effective June 1, 2002, increased the supplemental
Health Insurance benefit from $14.00 to $15.00 per year of service. And, increased the supplemental
cash benefit (for those retirees not participating in system healthcare) from $3.00 to $4.00 per year of
service
• In July of 2001, a one-time supplement was given to retired members participating in the County
health plans to help defray the cost of healthcare
• A 3% Cost of living was given to all retired, disabled and beneficiary members receiving a recurring
allowance
Using the Annual Report
The financial statements reflect the activities of the Santa Barbara County Employees’ Retirement System
and are composed of the Statement of Plan Net Assets (see page 18) and the Statement of Changes in Plan
Net Assets (see page 19). These statements are presented on an accrual basis and reflect all trust activities
as incurred.
A discussion of the actual components of this annual report, including the financial statements, is presented
in the transmittal letter on page 3.
Statement of Plan Net Assets
The Statement of Plan Net Assets shows the assets available for future payments to retirees and current
liabilities as of the fiscal year end. The following condensed comparative summary of Plan Net Assets
demonstrates that the pension trust is primarily focused on the cash and investments and the restricted net
assets. This Statement is also a good indicator of the financial wellbeing of the Retirement System.
Statement of Changes in Plan Net Assets
The Statement of Changes in Plan Net Assets provides an account of the current years additions and
deductions to the System.
14 ♦ SBCERS 2002 Annual Report
FINANCIAL SECTION
- Management Discussion and Analysis
Financial Analysis
As shown in Table 1, the current fiscal period closed with assets exceeding liabilities by $1.1 billion with all of
the net assets available to meet the System’s ongoing obligations to plan participants and their beneficiaries.
Despite the $69.5 million decrease caused by a lingering market correction, the Retirement System remains
in very good financial condition.
Table 1
PLAN NET ASSETS
2002 2001
Increase/
Decrease
Percent
Increase/
Decrease
Cash & Investments 1,150,012,539 $1,220,905,783 $(70,893,244) -5.81%
Securities Lending 71,220,335 71,805,334 $ (584,999) -0.81%
Receivables 20,461,985 30,136,597 $ (9,674,612) -32.10%
Total Assets $1,241,694,859 $1,322,847,714 $(81,152,855) -6.13%
Securities Lending 71,220,335 71,805,334 $ (584,999) -0.81%
Other Liabilities 46,363,307 57,399,757 $(11,036,450) -19.23%
Total Liabilities $117,583,642 $129,205,091 $(11,621,449) -8.99%
Net Assets $1,124,111,217 $1,193,642,623 $(69,531,406) -5.83%
The primary sources to finance the benefits SBCERS provides are accumulated through return on investments
and through the collection of employee and employer contributions. These income sources for fiscal year 2001-
2002 totaled negative $20.1 million, 42.49% increase from 2000-2001. This increase is a result of lower market
returns from the past two fiscal periods. Employer and Employee contributions resulted in an increase of 11.7%
over the contributions made in 2000-2001 due to an increase in the contribution rates (See Table 2).
The primary uses of SBCERS’ assets are in payment of benefits to retirees and their beneficiaries, refund of
contributions to terminated employees, and the cost of administering the system. These expenses for fiscal year
2001-2002 were $49.3 million, an increase of $5.9 million (13.7%) over 2000-2001. This increase is due to an
increase in the number of retirees and in the average amount they are paid (See Table 2).
15 ♦ SBCERS 2002 Annual Report
FINANCIAL SECTION
- Management Discussion and Analysis
Table 2
CHANGES IN PLAN NET ASSETS
2002 2001
Increase/
Decrease
Percent
Increase/
Decrease
Additions
Contributions $ 42,239,892 $ 37,804,949 $ 4,434,943 11.73%
Investment Income (net) (62,667,961) (52,753,579) (9,914,381) 18.79%
Securities Lending (net) 285,829 219,662 66,167 30.12%
Other 4,400 596,247 (591,847) -99.26%
Total Additions (20,137,840) (14,132,721) (6,005,118) 42.49%
Deductions:
Pension Benefits 46,792,742 40,775,721 6,017,022 14.76%
Other 2,600,824 2,668,328 (67,504) -2.53%
Total Deductions 49,393,566 43,444,049 5,949,518 13.69%
Net Increase $ (69,531,406) $ (57,576,770) $(11,954,636) 20.76%
Financial Analysis
The Plan’s investment activity is a function of the underlying marketplace for the period measured and the
investment policy’s asset allocation. For detailed investment returns, fees and the Fund’s asset allocation
please refer to the investment section page 37.
Funding Status
Of primary concern to most pension plan participants is the amount of money available to pay benefits.
Historically, pension plans have been under funded when the employer failed to make annual actuarially
required contributions to the Plan. The County of Santa Barbara has traditionally contributed the annual
required contribution (ARC) as determined by the Plan’s Actuary. No net pension obligation (NPO) exists for
the fund.
An indicator of funding status is the ratio of the actuarial value of the assets to the actuarial accrued liability
(AAL). An increase in the percentage over time usually indicates a plan is becoming financially stronger.
However, a decrease will not necessarily indicate a plan is in financial decline. Changes in actuarial
assumptions can significantly impact the AAL. Performance in the stock and bond markets can have a
material impact on the actuarial value of assets.
The funding ratio as of December 31, 2000 was 102.7% using the entry age normal method with a five year
smoothing actuarial value of assets. As of the fiscal year ended June 30, 2002 the net assets were just over
$1.1 billion. The next actuarial valuation is scheduled for December 2002.
16 ♦ SBCERS 2002 Annual Report
FINANCIAL SECTION
- Management Discussion and Analysis
17 ♦ SBCERS 2002 Annual Report
Asset Allocation
The Retirement System has adopted an asset allocation to monitor the funds investments. The asset
allocation is reviewed annually by the board of retirement and reflects the board’s level of risk and return. For
the current fiscal year, the target asset allocation range for the Fund is presented in Table 3.
Table 3
ASSET ALLOCATION RANGE
Min. Target Max. Target
Allocation Allocation
Cash 0.0% 3.0%
Fixed Income:
Domestic Bonds 25.5% 31.5%
Global Bonds 3.0% 6.0%
Total Fixed Income 28.5% 37.5%
Equities:
Domestic Equities 40.0% 50.0%
International Equities 16.0% 24.0%
Total Equities 56.0% 74.0%
Total Allocation Range 84.5% 114.5%
More details on the actual asset allocation for the current period can be found in the investment section on
page 40.
FINANCIAL SECTION
- Financial Statements
STATEMENT OF PLAN NET ASSETS - As of June 30, 2002 and 2001
JUNE 30, 2002 JUNE 30, 2001
ASSETS
Cash $ 5,019,236 $ 13,094,341
Short term investments 25,963,634 36,944,761
Total Cash and Short Term Investments 30,982,870 50,039,102
Receivables:
Contributions 2,449,555 2,243,809
Accrued interest 7,567,205 7,471,721
Dividends 576,995 529,232
Due from brokers for security sales 9,868,230 19,891,836
Total receivables 20,461,985 30,136,597
Investments, at fair value:
Domestic equity 409,243,080 526,418,807
Domestic fixed income 491,874,362 467,286,999
International equity 183,792,680 144,364,002
Global fixed income 34,112,083 32,774,431
Real estate mortgage loans 7,464 22,442
Total investments 1,119,029,669 1,170,866,681
Collateral Held for Securities Lent 71,220,335 71,805,334
Total assets $ 1,241,694,859 $ 1,322,847,714
LIABILITIES
Accounts payable 551,790 387,426
Benefits payable 833,049 730,307
Collateral Held for Securities Lent 71,220,335 71,805,334
Due to brokers for security purchases 44,978,468 56,282,024
Total liabilities 117,583,642 129,205,091
Net Assets Held in Trust for Pension Benefits $ 1,124,111,217 $ 1,193,642,623
See accompanying notes to financial statements.
For a Schedule of funding progress see page 19.
18 ♦ SBCERS 2002 Annual Report
FINANCIAL SECTION
- Financial Statements
19 ♦ SBCERS 2002 Annual Report
STATEMENT OF CHANGES IN PLAN NET ASSETS – As of June 30, 2002 and 2001
JUNE 30, 2002 JUNE 30, 2001
ADDITIONS:
Contributions:
Employers $ 31,759,299 $ 29,346,269
Plan members 10,480,593 8,458,680
Total contributions 42,239,892
37,804,949
Net Investment Income:
Net appreciation in
fair value of investments (112,627,986) (93,499,895)
Interest 45,336,603 35,636,659
Dividends 7,925,112 8,157,933
Securities Lending 2,161,723 5,424,781
Total investment income (57,204,548)
(44,280,522)
Less: Investment expenses (3,301,690) (3,048,276)
Securities lending expenses (1,875,894) (5,205,119)
Total Investment Expense (5,177,584)
(8,253,395)
Net investment income (62,382,132) (52,533,917)
Administrative Reimbursement 4,400
596,247
Total additions (20,137,840) (14,132,721)
DEDUCTIONS:
Benefits 46,792,742 40,775,721
Member withdrawals 885,479 1,144,835
Administrative expenses 1,715,345 1,523,493
Total deductions 49,393,566 43,444,049
Increase in net assets (69,531,406)
(57,576,770)
Net assets held in trust for pension benefits, beginning of year 1,193,642,623 1,251,219,393
Net assets held in trust for pension benefits, end of year $ 1,124,111,217 $ 1,193,642,623
See accompanying notes to financial statements.
FINANCIAL SECTION
- Notes to Financial Statements
A. DESCRIPTION OF PLAN
General
The Santa Barbara County Employees’ Retirement System (“Retirement System”) was established on
January 1, 1944 and organized under the provisions of the County Employees’ Retirement Law of 1937.
The Retirement System is a cost-sharing multiple-employer plan whose members include all permanent
and part-time employees (at least 40 hours per pay period) of the County of Santa Barbara (“the County”)
and the following districts: Air Pollution Control District (APCD), Carpinteria Cemetery District, Carpinteria-
Summerland Fire Protection District, Goleta Cemetery District, Oak Hill Cemetery District, Santa Barbara
Coastal Vector Control District, Santa Barbara County Association of Governments, Santa Maria
Cemetery District, and Summerland Sanitary District.
The Retirement System has nine retirement plans; five currently available to new employees. All new
General member employees (except those of the APCD) are enrolled in the contributory Plan V. All new
Safety members are enrolled in the contributory Plan IV. All new APCD employees are enrolled in a
separate, unique contributory APCD Plan II. All plans provide benefits as defined by the law upon
retirement, death, or disability of members, and eligible to receive cost-of-living benefits. The
participating entities share proportionally in all risks and costs, including benefit costs.
At June 30, 2002 the Retirement System’s membership consisted of the following:
General Safety
Plan
I/IV/V Plan II
Plan
III/IV/V Plan I/IV
Plan
II/III/IV Total
Retirees and beneficiaries currently receiving
Benefits; and terminated employees entitled
to but not yet receiving benefits 2,239 57 121 426 57 2,900
Current employees:
County of Santa Barbara:
Vested 1582 39 530 413 232 2,796
Non-vested 9 6 1,388 5 282 1,690
Subtotal 1,591 45 1,918 418 514 4,486
Districts:
Vested 71 -- 1 19 -- 91
Non-vested 17 -- 17 10 -- 44
Subtotal 88 -- 18 29 -- 135
Total 3,918 102 2,057 873 571 7,521
20 ♦ SBCERS 2002 Annual Report
FINANCIAL SECTION
- Notes to Financial Statements
A. DESCRIPTION OF PLAN (Continued)
At June 30, 2001 the Retirement System’s membership consisted of the following:
General Safety
Plan
I/IV Plan II
Plan
III/IV Plan I Plan II Plan III Total
Retirees and beneficiaries currently receiving
Benefits; and terminated employees entitled
to but not yet receiving benefits 2,123 55 72 435 39 11 2735
Current employees:
County of Santa Barbara:
Vested 1,712 33 316 459 124 71 2,715
Non-vested 21 27 1,415 1 1 270 1,735
Subtotal 1,733 60 1,731 460 125 341 4,450
Districts:
Vested 78 -- -- 19 -- -- 97
Non-vested 29 -- -- 8 -- -- 37
Subtotal 107 -- -- 27 -- -- 134
Total 3,963 115 1,803 922 164 352 7,319
Benefits
General Plan V and Safety Plan IV and APCD Plan I and II: Pension benefits are based upon a combination
of age, years of service, average monthly salary for the highest paid year of employment, and the benefit
payment option selected by the member. Disability benefits are based upon whether the disability was
service-connected or nonservice-connected. Death benefits are based upon whether the death occurred
before or after retirement and whether the death was service-connected or nonservice-connected.
General Plan II: Pension benefits are based upon a combination of age, years of service, and highest
average monthly salary for thirty-six consecutive months of employment and are coordinated with social
security benefits. A separate long-term disability program is available for members who become disabled,
regardless of length of service, or whether the disability is job related. Death benefits are based upon
whether the death occurred before or after retirement.
Cost-of-Living Benefits: All plans, with the exception of General Plan II, provide for cost-of-living adjustments
for retired members. Cost-of-living adjustments are made to retired members' benefits each April based
upon reference to the Bureau of Labor Statistics Consumer Price Index for All Urban Consumers, subject to
a 3% maximum limitation.
Other Post Employment Benefits
In addition to the retirement benefits described above, for the year ended June 30, 2002, the Retirement
System participated in its retired members' health insurance premiums by contributing $15.00 per month per
year of service to those retirees who elect a County sponsored health plan, and $4.00 per month per year of
service cash option to those retirees who do not participate in a County sponsored health plan. The same
actuarial assumptions and cost methods are used for determining the post-retirement health care
contribution and accrued liability as those used for determining pension contributions. The County funded
$8.00 per month of service, which is incorporated in the employer contribution rate and the Retirement
System has actuarially prefunded the additional $7.00. Of the eligible retirees, during the year ended June
30, 2002, an average of 1,426 per month were enrolled in the County health plan, for which the
21 ♦ SBCERS 2002 Annual Report
FINANCIAL SECTION
- Notes to Financial Statements
A. DESCRIPTION OF PLAN (Continued)
Other Post Employment Benefits (Continued)
Retirement System contributed $3,875,607. An average of 806 retirees and beneficiaries per month have
chosen not to participate in the County health plan and the Retirement System has paid $350,336 for the
cash option. In total, the Retirement System paid out $4,225,943 for the year ended June 30, 2002 for post
employment health care. There is no current unfunded liability for this benefit.
For the year ended 2001, the Retirement System participated in its retired members' health insurance
premiums by contributing $14.00 per month per year of service to those retirees that elect a County
sponsored health plan, and $3.00 per month per year of service cash option to those retirees that do not
participate in a County sponsored health plan. The same actuarial assumptions and cost methods are used
for determining the post-retirement health care contribution and accrued liability as those used for
determining pension contributions. The County funded $8.00 per month of service, which is incorporated in
the employer contribution rate and the Retirement System has actuarially prefunded the additional $6.00.
Of the eligible retirees, during the year ended June 30, 2001, an average of 1,360 per month were enrolled
in the County health plan, for which the Retirement System contributed $3,675,372. An average of 773
beneficiaries per month have chosen not to participate in the County health plan and the Retirement System
has paid $284,846 for the cash option. In total, the Retirement System paid out $3,960,218 for the year
ended June 30, 2001 for post employment health care. There was no current unfunded liability for this
benefit.
See the plan document for a more complete description of plan benefits.
Vesting
General Plan V, Safety Plan IV and APCD Plan I and II: Upon completing five years of creditable service,
employees have non-revocable rights to receive benefits attributable to an employer's contributions,
provided their contributions have not been withdrawn. Members are eligible to retire at age 50 with
retirement credit of ten years from date of membership, or thirty years of creditable service (safety members
twenty years) regardless of age, or upon attaining age 70.
If an employee terminates before rendering five years of service, the employee forfeits the right to receive
benefits and is entitled to withdraw the employee contributions made, together with accumulated interest,
unless the member enters a reciprocal retirement system within six months and elects to keep these monies
on deposit with the Retirement System.
If an employee terminates after five years of service, the employee may elect to leave the accumulated
deposits in the retirement fund and be granted a deferred retirement allowance at the time the member
would have been entitled to the allowance if service had been continued.
General Plan II: Upon completing ten years of creditable service, Plan II members have non-revocable
rights to receive benefits. Plan II members are eligible to retire at age fifty-five with retirement credit of ten
or more years of service. Plan II members have a one-time election to defer accrued Plan II benefits and
enter the contributory retirement plan in effect at that time. Contributions are based upon age at the time of
transfer.
B. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Accounting
The Retirement System’s financial statements are prepared on the accrual basis of accounting.
Employer and employee contributions are recognized as revenue in the period in which employee
services are performed, and benefits and refunds are recognized as expense when the corresponding
22 ♦ SBCERS 2002 Annual Report
FINANCIAL SECTION
- Notes to Financial Statements
B. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Basis of Accounting (Continued)
liabilities are incurred. Investment income is recognized as revenue when earned. Net appreciation
(depreciation) in fair value of investments held by the Retirement System is recorded as an increase
(decrease) to investment income based on valuation of investments at year-end. Realized gains and
losses are recognized upon the maturity or disposition of the security.
New Accounting Pronouncement
In June 1999 the Governmental Accounting Standards Board (“GASB”) issued Statement No. 37, Basic
and Local Governments and in June 2001 the GASB issued Statement No. 37, Basic Financial
Statements – and Management’s Discussion and Analysis – for State and Local Governments: Omnibus,
which amended certain provisions of GASB 34. GASB 34 had no monetary impact on the System’s
financial statements, but does require additional disclosure. As a result of the adoption of GASB 34, the
Management’s Discussion and Analysis has been included as required supplementary information and
precedes the financial statements.
Apportionment of Interest
Interest is apportioned semi-annually at June 30 and December 31 to Member, County, and Retired
Member Reserve accounts for all contributions that have been on deposit for six months, based on the
annual actuarial assumption rate of 8.16%.
Valuation of Investments
Debt and equity securities are reported at fair value. Short-term investments are reported at cost, which
approximates fair value. Securities traded on national or international exchanges are valued at the last
reported sales price at current exchange rates. Real estate mortgage loans are valued on the basis of
future principal and interest payments, and are reported at prevailing interest rates for similar instruments.
Income Taxes
The Internal Revenue Service has ruled that plans such as the Retirement System qualify under Section
401(a) of the Internal Revenue Code and are therefore not subject to tax under present income tax laws.
Accordingly, no provision for income taxes has been made in the accompanying financial statements, as
the plan is exempt from federal and state income taxes under the provisions of the Internal Revenue
Code, Section 501, and California Revenue and Taxation Code Section 23701.
Estimates
The preparation of the financial statements in conformity with generally accepted accounting principles
require the plan administrator to make estimates and assumptions that affect certain amounts and
disclosures. Accordingly, actual results may differ from those estimates.
Futures Contracts
As of June 30, 2002, the Retirement System held futures contracts representing approximately $66.9
million in notional principal value and for 2001, $94.1 million in notional principal value. The role of the
futures contracts is to hedge a portfolio of short duration fixed income securities to the equity market. The
contracts expire quarterly.
Forward Currency Contracts and Foreign Currency
Forward currency contracts are used to control currency exposure and facilitate the settlement of
international security purchase and sale transactions. Included in net income are gains and losses from
foreign currency transactions. The net foreign currency gain for the fiscal years 2002 and 2001 were
$280,281 and $314,824. At June 30, 2002 forward currency contracts receivable and payable totaled
$65,031,960 and $64,854,575 respectively and for June 30, 2001, $38,963,052 and $38,975,801
respectively.
23 ♦ SBCERS 2002 Annual Report
FINANCIAL SECTION
- Notes to Financial Statements
D. ADMINISTRATIVE EXPENSES
Effective July 1, 2000 the Board of Retirement adopted Government Code §31522.1 and §31580.2. As a
result, the Board has adopted an annual budget for the year ended June 30, 2002 that covers the
expense of administration of the retirement system with the earnings of the retirement fund and are
limited to eighteen-hundreds of 1 percent (18 basis points). Total administrative expenses for the year
ended June 30, 2002 and 2001 were $1,715,345 and $1,523,493 of which $1,129,334 and $1,119,881
were subject to §31580.2 or 9.65 and 8.95 basis points respectively.
2002 2001
Expenses Subject to Statutory Limitation:
Employee Salaries and Benefits $ 738,137 $ 650,360
Operating Expenses 169,837 145,646
Professional Services 221,360 323,875
Total Expenses Subject to Statutory Limitation 1,129,334 1,119,881
Expenses Not Subject to Statutory Limitation:
Actuarial Costs 19,450 184,787
Legal Costs 566,561 218,825
Total Expenses Not Subject to Statutory Limitation 586,011 403,612
Total Administrative Expenses $ 1,715,345 $ 1,523,493
E. CASH AND INVESTMENTS
The Retirement System operates under the "Prudent Person Rule" which authorizes the Board, at its
discretion, to allow for the purchase, holding, or sale of any form or type of investment, financial instrument,
or financial transaction when prudent in the informed opinion of the Board.
Cash
The cash balance represents both operating cash held by the County Treasurer and investment cash on
deposit with the investment custodian.
Bank balances of deposits are categorized by level of risk assumed. The Retirement System’s bank
balances are categorized as follows:
Category 1 - Insured or collateralized with securities held by the entity or its agent in the entity’s
name.
Category 2 - Deposits collateralized with securities held by the pledging financial institution’s
trust department or agent in the entity’s name.
Category 3 - Uncollateralized deposits
The carrying value of deposits approximated the bank balances at June 30, 2002 and 2001.
The portion of the System’s cash held by the County Treasurer is a part of the County’s cash and
investment pool. Accordingly, the System’s investments are held in the name of the County and are not
specifically identifiable. At June 30, 2002, cost approximated fair value of the System’s share of pooled
cash and investments
24 ♦ SBCERS 2002 Annual Report
FINANCIAL SECTION
- Notes to Financial Statements
E. CASH AND INVESTMENTS (Continued)
Investments
In accordance with generally accepted accounting principles, the Retirement System’s investments at June
30, 2002 and 2001 are categorized to give an indication of the level of credit risk assumed by the
Retirement System. The Retirement System’s investments are categorized as follows:
Category 1 - Insured or registered, or securities held by the entity or its agent in the entity’s
name.
Category 2 - Uninsured and unregistered, with the securities held by the counter parties trust
department or agent in the entity’s name.
Category 3 - Uninsured and unregistered, with securities held by the counter party’s trust
department or agent but not in the entity’s name. (This includes the portion of the
carrying amount of any underlying securities.)
Not Required To Be
Categorized - Includes investments made directly with another party, real estate, direct
investments in mortgages and other loans, open-end mutual funds, pools managed
by other governments, annuity contracts and guaranteed investment contracts.
Cash and Investments by category as of June 30, 2002 are as follows (in thousands):
Category
1 2 3
Not Required
to be
Categorized
Contractual/
Fair Value
Cash $ 100 -- $ 4,919 -- $ 5,019
Short-term Investment Fund -- -- -- 25,964 $ 25,964
Domestic Equity 409,243 -- -- -- 409,243
Domestic Fixed Income 491,874 -- -- -- 491,874
International Equity 183,793 -- -- -- 183,793
Global Fixed Income 34,112 -- -- -- 34,112
Investments under Securities Loans -- -- -- $ 71,220 71,220
Trust deeds -- -- -- 7 7
Total investments $ 1,119,122 -- $ 4,919 $ 97,191 $ 1,221,232
Reconciliation of investments on Statement of Plan Net Assets at June 30,2002 (in thousands):
Cash and Short Term Investments $ 30,983
Investments at Fair Value 1,119,029
Collateral Held for Securities Lent 71,220
Total $1,221,232
25 ♦ SBCERS 2002 Annual Report
FINANCIAL SECTION
- Notes to Financial Statements
E. CASH AND INVESTMENTS (Continued)
Cash and Investments by category as of June 30, 2001 are as follows (in thousands):
Category
1 2 3
Not Required
to be
Categorized
Contractual/
Fair Value
Cash $ 100 -- $ 12,994 -- $ 13,094
Short-term Investment Fund -- -- -- 36,945 36,945
Domestic Equity 526,419 -- -- -- 526,419
Domestic Fixed Income 467,287 -- -- -- 467,287
International Equity 144,364 -- -- -- 144,364
Global Fixed Income 32,775 32,775
Investments under Securities Loans -- -- -- 71,805 71,805
Trust deeds -- -- -- 22 22
Total investments $ 1,170,945 -- 12,994 $ 108,772 $ 1,292,711
Reconciliation of investments on Statement of Plan Net Assets at June 30, 2001 (in thousands):
Cash and Short Term Investments $ 50,039
Investments at Fair Value 1,170,867
Collateral Held for Securities Lent 71,805
Total $1,292,711
At June 30, 2002 and 2001 the Retirement System did not contain any investments in any one entity
(other than those issued or guaranteed by the U.S. Government) that represented more than 5 percent of
the Retirement System’s total investment portfolio.
SECURITIES LENDING
The Retirement Systems’ investment policy allows securities lending transactions. Securities lending
transactions are loans of securities to broker-dealers and other entities for collateral with a simultaneous
agreement to return the collateral for the same securities in the future. The System first contracted with
State Street Bank and Trust (State Street) in 1992 for securities lending services. As custodian, State
Street acts as the agent for all securities lending transactions. Collateral must be in the form of cash
(both United States and foreign currency), securities issued or guaranteed by the U.S. Government,
sovereign debt of foreign countries, or irrevocable bank letters of credit. Transactions are collateralized at
no less than 100% percent of market value of the loaned security. Collateral is marked to market daily.
The custodian invests the collateral received in short-term investment funds (maintained by the
custodian); money market mutual funds; and other similar investments as the custodian may select. At
year-end, the System had no credit risk exposure to borrowers because the collateral value exceeded
market value.
The average term of all System loans is overnight or “on demand.” The custodian will ensure that, in any
agreement with a borrower, it retains its absolute right to terminate the agreement without cause, upon
short notice and without any penalty. The System cannot pledge or sell collateral securities received
unless the borrower defaults. In the event of a borrower default, State Street indemnifies the System to
the extent of replacing the securities loaned.
26 ♦ SBCERS 2002 Annual Report
FINANCIAL SECTION
- Notes to Financial Statements
E. CASH AND INVESTMENTS (Continued)
SECURITIES LENDING (Continued)
Cash collateral is invested in the lending agent’s short term investment pool, which as of June 30, 2002
had an average duration of 69 days, an average weighted maturity of 144 days. Because the loans were
terminable at will, their duration did not generally match the duration of the investments made with cash
collateral.
Securities Lending Income as of June 30, 2002 and 2001
2002 2001
Gross Income $ 2,161,723 $ 5,424,781
Expenses:
Borrower Rebates 1,721,965 5,086,824
Bank Fees 153,929 118,295
Total Expenses 1,875,894 5,205,119
Net Income From Securities Lending $ 285,829 $ 219,662
Fair Value of Loaned Securities as of June 30,2002
Cash
Collateral
Securities
Collateral
Letter of
Credit
Collateral
Tri-Party
Collateral Total
U.S. Government and Agency $ 56,742,699 -- -- -- $ 56,742,699
Domestic Equity 5,954,515 -- -- -- 5,954,515
Domestic Fixed 6,494,940 -- -- -- 6,494,940
Total $ 69,192,154 -- -- -- $ 69,192,154
Fair Value of Loaned Securities as of June 30, 2001
Cash
Collateral
Securities
Collateral
Letter of
Credit
Collateral
Tri-Party
Collateral Total
U.S. Government and Agency $ 55,553,566 -- -- -- $ 55,553,566
Domestic Equity 10,735,818 -- -- -- 10,735,818
Domestic Fixed 3,044,416 -- -- -- 3,044,416
Total $ 69,333,800 -- -- -- $ 69,333,800
27 ♦ SBCERS 2002 Annual Report
FINANCIAL SECTION
- Notes to Financial Statements
E. CASH AND INVESTMENTS (Continued)
SECURITIES LENDING (Continued)
Fair Value of Collateral Received for Loaned Securities as of June 30, 2002
Cash
Collateral
Securities
Collateral
Letter of
Credit
Collateral
Tri-Party
Collateral Total
U.S. Government and Agency $ 57,964,461 -- -- -- $ 57,964,461
U.S. Corporate 13,255,874 -- -- -- 13,255,874
Total $ 71,220,335 -- -- -- $ 71,220,335
Fair Value of Collateral Received for Loaned Securities as of June 30, 2001
Cash
Collateral
Securities
Collateral
Letter of
Credit
Collateral
Tri-Party
Collateral Total
U.S. Government and Agency $ 56,969,415 -- $ 665,655 -- $ 57,635,070
U.S. Corporate 14,170,264 -- -- -- 14,170,264
Total $ 71,139,679 -- $ 665,655 -- $ 71,805,334
F. RESERVES AND DESIGNATIONS
Member and employer contributions are allocated to various legally required reserve accounts based on
actuarial determinations. All reserves are fully funded.
Member Contribution Reserves represent the balance of member contributions. Additions include
member contributions and interest earnings; deductions include refunds of member contributions and
transfers to Retired Member Reserves.
County and District Reserves represent the balance of employer contributions for future retirement
payments to current active members. Additions include contributions from the employer and interest
earnings; deductions include transfers to Retired Members Reserves, lump sum death benefits, and
payments under §31725.5 and §31725.6 of the County Employees’ Retirement Law of 1937.
Retired Member Reserves represent the balance of transfers from Member Reserves and Employer
Reserves and interest earnings, less payments to retired members.
Burial Allowance Reserves represent the balance of monies set aside to fund the increase of the lump
sum death benefit for retirees. Additions include related earnings and excess earnings; deductions include
payments to the beneficiaries of retired members who are deceased.
Health Coverage Reserves and Supplemental Health Coverage Reserves represent the balance of
monies set aside for the payment of health insurance premiums and cash benefits for retired members.
Additions include contributions from the employer, interest and excess earnings; deductions include
payments of premiums for retired members who are enrolled in a County sponsored health plan and cash
payments for retired members who do not participate in the health plans.
28 ♦ SBCERS 2002 Annual Report
FINANCIAL SECTION
- Notes to Financial Statements
F. RESERVES AND DESIGNATIONS (Continued)
Sick Leave Reserves represent the balance of monies set aside to fund the conversion of unused sick
leave hours (maximum of 2080 hours) to service credit for the purpose of calculation of retirement benefits.
Additions include related earnings and excess earnings; deductions include transfers to Retired Member
Reserves.
Spousal Continuance Reserves represent monies transferred to fund the adoption of §31760.2 of the
County Employees’ Retirement Law of 1937, which allows 60 percent continuance to a spouse if the spouse
was married to the retiree at least two years prior to the member’s death and the spouse is age 55 or older
on the date of the retiree’s death.
Special Allowance Reserve represents monies transferred to additional benefits, which have been granted
by the Board of Retirement. Additions include related and excess earnings; deductions include payments to
retired members.
Strategic Designations represent reserves accumulated for future benefits. Additions include interest
earnings; deductions include loss earnings and transfers to other reserves to fund for additional benefits.
Contingency Reserve currently represents 3% of undistributed earnings set aside for unforeseen
payments like lawsuits.
Reserve account balances as of June 30, 2002 and 2001:
2002 2001
Member Contribution Reserves
$ 111,246,950 $ 103,273,223
County and District Reserves 468,478,140 462,028,415
Retired Member Reserves 424,542,812 353,154,592
Burial Allowance Reserve 5,126,377 4,955,522
Health Coverage Reserves 36,779,467 37,028,879
Supplemental Health Coverage Reserves 42,319,812 34,727,833
Sick Leave Reserves 4,304,341 3,979,604
Spousal Continuance Reserves 1,231,563 1,138,649
Special Allowance Reserve 21,965,972 23,620,278
Strategic Designation -- 26,279,703
Contingency Reserve 31,805,735 --
G. CONTRIBUTION REQUIREMENTS AND CONTRIBUTIONS MADE
Plan V: Contributions are made by members and employers at rates recommended by an independent
actuary, approved by the Board of Retirement, and adopted by the Board of Supervisors. For certain
bargaining units, a portion of the member contribution is paid by the County. Member contributions cannot
be withdrawn until separation from employment. Terminated or withdrawn member contributions forfeit to
the Retirement System if the member does not request a refund within five years of terminating
membership, unless member is eligible and has elected to defer their retirement benefit.
Plan II: Employer contribution rates are recommended by the actuary, approved by the Board of Retirement,
and adopted by the Board of Supervisors. There are no member contributions.
29 ♦ SBCERS 2002 Annual Report
FINANCIAL SECTION
- Notes to Financial Statements
G. CONTRIBUTION REQUIREMENTS AND CONTRIBUTIONS MADE (Continued)
The actual contributions for the years ended June 30, 2002 and 2001 were made in accordance with
actuarially determined contributions for the year. The following table summarizes the contributions for the
years ended June 30, 2002 and 2001:
2002 2001
General:
Plan I/IV/V:
Employer contributions - normal cost $10,564,455 $10,444,405
Member contributions 2,149,604 2,296,166
Plan II:
Employer contributions - normal cost 75,876 84,235
Plan III/IV/V:
Employer contributions - normal cost 8,858,799 7,265,329
Member contributions 4,738,710 3,949,612
Safety:
Plan I/IV:
Employer contributions - normal cost 7,163,998 6,994,857
Member contributions 1,004,121 554,864
Plan II/III/IV
Employer contributions - normal cost 4,736,797 4,108,486
Member contributions 2,395,940 1,489,079
Air Pollution Control District
General:
Plan I and II
Employer contributions - normal cost 359,373 448,956
Member contributions 192,219 168,960
Total $42,239,892 $37,804,949
Contributions from all employers totaled $31,759,299 (13.5% of current covered payroll) and contributions
from employees totaled $10,480,593 (4.5% of current covered payroll) based on actuarially determined
contribution requirements. Of this, $30,771,094 (or 96.9%) of employer contributions and $10,187,200 (or
97.2%) of employee contributions were attributable to the County. The pension contributions represent
funding of $31,624,143 (13.48% of current covered payroll) for normal cost. There was no unfunded
actuarial accrued liability for the current period.
H. GAINS AND LOSSES
Realized and Unrealized gains and losses are reported as the Net Appreciation / Depreciation on the
Statement of Changes in Plan Assets.
As of June 30, 2002 and 2001 the Net Appreciation / Depreciation is comprised of:
2002 2001
Realized Gain (Loss) on Sale $ 17,801,936 $ (12,835,595)
Unrealized Gain/Loss (130,429,922) (80,664,300)
Net Appreciation/ Depreciation in Value of Investments $ (112,627,986) $ (93,499,895)
30 ♦ SBCERS 2002 Annual Report
FINANCIAL SECTION
- Notes to Financial Statements
31 ♦ SBCERS 2002 Annual Report
I. PLAN TERMINATION
There are no plan termination provisions under the County Employees’ Retirement Law of 1937, which
governs the operation of the Retirement System.
J. CONTINGENCIES
The Retirement System is a defendant in various lawsuits, which, in management’s opinion, will not have
a material effect on the financial statements.
K. COMPARATIVE DATA / RECLASSIFICATIONS
Comparative data for the prior year has been presented in the financial statements in order to provide an
understanding of the changes in net assets. Also, certain amounts presented in the prior year have been
reclassified in order to be consistent with the current year’s presentation.
FINANCIAL SECTION
- Required Supplemental Information
Six-year historical trend information about the Retirement System is presented here as required
supplementary information. This information is intended to help users assess the Retirement System’s
funding status on a going-concern basis, assess progress made in accumulating assets to pay benefits
when due, and make comparisons with other public employees’ retirement systems.
SCHEDULE OF FUNDING PROGRESS**
Valuation
Date
(1)
Actuarial Value
of Plan Assets
(2)
Actuarial
Accrued
Liability
(AAL)
(3)
Funded
Ratio
(1) ÷ (2)
(4)
Unfunded
Actuarial
Accrued
Liability
(UAAL)
(2) - (1)
(5)
Annual
Covered
Payroll
(6)
UAAL
as a
Percentage
of Covered
Payroll
(4) ÷ (5)
12/31/00 $1,171,138,000 $1,145,519,000 100.2% ($25,619,000) $219,739,000 (11.7)%
12/31/99 1,068,357,000 1,067,377,000 100.1 (980,000) 199,448,000 (.5)
12/31/98 938,295,000 950,205,000 98.7 11,910,000 184,291,000 6.5
12/31/97 799,539,000 873,624,000 91.5 74,085,000 171,602,000 43.2
12/31/96 693,300,597 758,771,583 91.4 65,470,986 159,906,000 40.9
12/31/95 624,822,614 711,868,472 87.8 87,045,858 154,120,000 56.5
SCHEDULE OF EMPLOYER CONTRIBUTIONS
Year
Ended
Dec. 31
Annual
Required
Contributions
(ARC)
Contributions
Made As a
Percentage of
(ARC)
2000 $29,272,000 100.0%
1999 30,484,000 100.0
1998 28,414,000 100.0
1997 31,692,000 100.0
1996 27,114,000 100.0
1995 27,664,000 100.0
Note: ARC are as of Dec. 31 and employer contributions are as of June 30 in the above calculation.
32 ♦ SBCERS 2002 Annual Report
FINANCIAL SECTION
- Required Supplemental Information
33 ♦ SBCERS 2002 Annual Report
NOTE TO THE SCHEDULE OF FUNDING PROGRESS
AND SCHEDULE OF EMPLOYER CONTRIBUTIONS
The information presented in the required supplementary schedules was determined as part of the
actuarial valuation at the dates indicated. Additional information of the latest actuarial valuation follows.
Valuation date: December 31, 2000
Actuarial cost method: Entry Age Normal Actuarial Cost Method
Amortization method: Level percent
Remaining open amortization period: 5 years
Asset valuation method: Actuarial book value
Actuarial assumptions:
Investment rate of return: 8.16 %
Projected salary increases: 1% Merit and Longevity, 4.50 % Inflation (COLA)
Cost-of-living adjustments: Up to 3 % for Plans I, III, IV, V, and APCD Plans I and II. General Plan II is
not eligible to receive these adjustments.
FINANCIAL SECTION
- Other Supplemental Information
Schedule of Administrative Expenses
For the Years Ended June 30, 2002 and 2001
2002 2001
Personnel Services
Salaries and Employee Benefits $ 738,137 $ 650,360
Total Personnel Services 738,137 650,360
Professional Services
Actuarial Consulting Fees 19,450 184,787
Computer Software Services and Support 45,737 64,906
External Audit Fees 22,700 18,000
Disability Medical Fees 79,882 64,065
Disability Hearing Officer Fees 51,555 32,316
Disability Stenographic Fees 9,481 15,273
Disability Attorney Fees 187,156 183,938
Legislative and Other Legal Services 379,405 34,887
Other Professional Services 12,005 36,479
Policy Development -- 92,836
Total Professional Services 807,371 727,487
Communication
Postage 24,583 20,139
Telecommunication 4,727 5,358
Training 37,756 36,742
Transportation and Travel 1,751 3,050
Total Communication 68,817 65,289
Miscellaneous
Computer Equipment and Supplies 23,468 15,456
Other Office Expenses 13,593 23,093
Insurance 63,959 41,808
101,020 80,357
Total Administrative Expenses $1,715,345 $ 1,523,493
34 ♦ SBCERS 2002 Annual Report
FINANCIAL SECTION
- Other Supplemental Information
35 ♦ SBCERS 2002 Annual Report
Schedule of Investment Fees
For the Years Ended June 30, 2002 and 2001
2002 2001
Investment Activity
Investment Management Fees
Stock Managers
Domestic $1,060,191 $1,436,884
International 941,879 122,258
Bond Managers
Domestic 666,530 879,370
International 185,820 214,709
Mortgage Loan Services 56 97
Total From Investment Activity 2,854,476 2,653,318
Other Investment Expenses
Consultant 91,500 63,000
Custodian 355,714 331,958
Total Other Investment Expenses 447,214 394,958
Total Fees and Other Investment Expenses $3,301,690 $3,048,276
Schedule of Payments to Consultants
2002 2001
Actuarial Services $ 19,450 $ 187,787
Audit Services 22,700 18,000
Legal Services 566,561 218,825
Policy Development -- 92,836
Total Payments to Consultants $ 608,711 $ 517,448
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36 ♦ SBCERS 2002 Annual Report

INVESTMENT SECTION
- Letter of Certification
38 ♦ SBCERS 2002 Annual Report
INVESTMENT SECTION
- Investment Policies
OUTLINE OF INVESTMENT POLICIES
External investment management firms manage the System’s investment assets. Professional investment
consultants, along with staff, closely monitor the activity of these managers and assist the Board with the
implementation of investment policies and long-term investment strategies.
The Retirement Board, having sole and exclusive authority and fiduciary responsibility for the investment and
administration of the system has adopted an Investment Objectives and Policy Statement, which reflect the
Board’s policies for management of the Systems investments.
1. The investment of the assets of the Retirement System shall be based on a financial plan that will
consider:
• the financial condition of the Retirement System
• the expected long-term capital market outlook
• the Retirement Board’s risk tolerance
• future growth of active and retired participants
• inflation and the rate of salary increase
• cash flow
The financial plan measures the potential impact on pension cost of alternative investment policies in
terms of risk and return based on various levels of asset diversification and the current and projected
liability structure of the retirement plan.
2. Based on the financial plan, it will be the responsibility of the Board to determine the specific allocation
of the investments among the various asset classes considered prudent given the retirement plan’s
liability structure. The asset allocation, which is the Retirement System’s investment structure, shall be
sufficiently diversified to maintain risk at a reasonable level, determined by the Board without
imprudently sacrificing return. The Board shall determine performance benchmarks against which the
asset allocation plan shall be reviewed to ensure that the asset mix remains appropriate to meet long
term goals of the investment program.
3. In accordance with the asset allocation guidelines, the Board will select external investment managers
with demonstrated experience and expertise whose investment styles collectively will implement the
planned asset allocation.
4. It is the responsibility of the Board to administer the investments of the Retirement System at the lowest
possible cost, being careful to avoid sacrificing quality.
39 ♦ SBCERS 2002 Annual Report
INVESTMENT SECTION
- Investment Performance
PERFORMANCE RESULTS
Annualized
Investments Current Qtr (2002) 1 - year 3 - year 5 - year
Total Portfolio -5.2% -5.0% -0.9% 5.1%
Benchmark (1) -4.8% -5.9% -2.3% 4.4%
Domestic Equity -12.0% -13.9% -5.2% 4.9%
Benchmark (2) -12.9% -16.9% -9.3% 3.6%
International Equity -4.4% -7.0% -5.4% 0.9%
MSCI-EAFE -3.2% -7.1% -6.0% -0.9%
Domestic Fixed Income 2.0% 7.1% 7.6% 7.5%
Benchmark (3) 4.0% 8.6% 8.2% 7.6%
International Fixed Income 12.0% 14.8% 3.4% 3.8%
Benchmark (4) 11.7% 14.0% 4.5% 4.4%
Calculations were prepared using a time-weighted rate of return based on the market rate of return in accordance with
AIMR’s Performance Presentation Standards.
Benchmark
(1) Standard and Poor’s 500 (S&P 500); Russell ; Morgan Stanley Capital International European Australia, Far East
(MSCI-EAFE); Lehman Aggregate; Solomon Brothers World Government Bond Index (SBWGB); Treasury-Bills (TBills)
(2) S&P 500; Russell 1000 & 3000
(3) Lehman Aggregate
(4) SBWGB
ASSET ALLOCATION
Market Value Actual % Target %
Cash $ 5,019,236 0.4 --
Short-term investments 25,963,634 2.3 2.0
30,982,870 2.7 2.0
Fixed Income:
Domestic Bonds 491,874,362 42.7 28.5
Global Bonds 34,112,083 3.0 4.5
Total Fixed Income 525,986,445 45.7 33.0
Equities:
Domestic Equities 409,243,080 35.6 45.0
International Equities 183,792,680 16.0 20.0
Total Equities 593,035,760 51.6 65.0
Real Estate 7,464 0 --
Total $1,150,012,539 100 100
40 ♦ SBCERS 2002 Annual Report
INVESTMENT SECTION
- Investment Performance
Actual Asset Allocation
Cash
Domestic
Bonds
Global Bonds
Domestic
Equities
International
Equities
`
Target Asset Allocation
Cash Domestic
Bonds
Global Bonds
Domestic
Equities
International
Equities
`
SCHEDULE OF TOP TEN EQUITY
AND FIXED INCOME SECURITIES
TOP TEN EQUITY SECURITIES *
By Market Value
Shares Security Name Market Value
3,656,575 BIAM GROUP TRUST INTL EQUITY $ 77,219,906
1,558,708 SSB INTL COMINGLED FUND 54,356,820
5,812,326 NICHOLAS APPLEGATE EMERGING 52,214,215
332,208 EXXON MOBIL CORP 13,593,951
275,934 CITIGROUP INC 10,692,443
257,350 PFIZER INC 9,007,250
141,312 JOHNSON + JOHNSON 7,384,965
100,882 AMERICAN INTL GROUP INC 6,883,179
95,382 BANK AMER CORP 6,711,078
228,800 GENERAL ELEC CO 6,646,640
TOP TEN FIXED INCOME SECURITIES *
By Market Value
Par Value Security Name Market Value
12,400,000 GENERAL ELEC CAP CORP MTN 12,490,768
9,000,000 VERIZON GLOBAL FDG CORP 8,569,620
7,890,000 DRESDNER FDG TR I 8,518,675
7,600,000 FORD HLDGS INC 8,386,372
8,100,000 IRS SWAP 3MLIBOR 8,100,000
7,090,000 FEDERAL NATL MTG ASSN 7,486,615
6,440,000 GERMANY (FED REP) 6,524,401
5,995,000 FNMA TBA JUL 30 SINGLE FAM 6,291,033
4,800,000 MAY DEPT STORES CO 5,863,152
5,200,000 HVB FUNDING TRUST III 5,698,888
* A complete list of portfolio holdings is available upon request.
41 ♦ SBCERS 2002 Annual Report
INVESTMENT SECTION
- Investment Performance
42 ♦ SBCERS 2002 Annual Report
SCHEDULE OF PROFESSIONAL FEES AND SERVICE
Assets Under
Management Fees Basis Points
Investment Managers
Fixed Income Managers 525,993,909 $852,406 0.08
Equity Managers 593,035,760 2,002,070 0.18
Total Investment Managers 1,119,029,669 2,854,476 0.26
Other Investment Service Fees:
Custodian Fees -- 355,714 0.03
Investment Consultant Fees -- 91,500 0.01
-- 447,214 0.04
Total Investment Service Fees $1,119,029,669 $3,301,690 0.30%
INVESTMENT SUMMARY
As of June 30, 2002
Type of Investment Market Value
Percent of
Total Market
Value
Fixed Income Investments:
Domestic $491,874,362 42.8%
Global 34,112,083 3.0
Total Fixed Income Investments 525,986,445 45.8
Equity Investments-Domestic and International:
Consumer Discretionary 40,549,648 3.5
Consumer Staples 24,149,978 2.1
Energy 27,321,239 2.4
Financial 63,446,744 5.5
General Business 260,830,308 22.7
Health Care 25,600,121 2.2
Industrial 31,472,171 2.7
Information Technology 58,259,717 5.1
Materials 20,556,670 1.8
Telecommunication 26,577,609 2.3
Utilities 14,271,555 1.2
Total Equity Investments 593,035,760 51.5
Alternative Investments:
Real Estate 7,464 0.0
Total Alternative Investments 7,464 0.0
Cash 5,019,236 0.3
Short-Term Investments 25,963,634 2.4
Total $1,150,012,539 100.0%

ACTUARIAL SECTION
- Letter of Certification
44 ♦ SBCERS 2002 Annual Report
ACTUARIAL SECTION
- Assumptions and Methods
SUMMARY OF ACTUARIAL ASSUMPTIONS AND METHODS
Normal cost and the allocation of benefits values between service rendered before and after the
valuation date was determined using an individual entry actuarial cost method having the following
characteristics:
(a) The annual normal cost for each active member, payable from the date of entry into the Retirement
System to the date of retirement, are sufficient to accumulate the value of the member’s benefit at the
time of retirement;
(b) Each annual normal cost is a consistent percentage of the member’s year-by-year projected
covered pay.
The actuarial accrued liability is the cost allocated to years prior to the actuarial valuation date; it is the
excess of the value of benefits over the value of future member contributions and the value of future
normal costs. The difference between the Actuarial Accrued Liability and the plan assets is called the
Unfunded Actuarial Accrued Liability and is funded (amortized) as a level percentage of projected
future payroll over five years from December 31, 2000.
The current approach used to recognize gains and losses is to spread each year’s unrealized gains
and losses over five years. This approach results in only 20 percent of unrealized gains and losses to
be recognized in any one year. Note that starting with fiscal year 1993-94 realized gains and losses
are treated the same. This was done on a prospective basis only.
The contribution requirement and benefits values of the Retirement System are calculated by applying
actuarial assumptions to the benefit provisions and member information furnished, using the actuarial
cost methods described above. The recommended actuarial contribution rates were adopted by the
Board of Retirement and implemented by the Retirement System.
The principle areas of financial risk which require assumptions about future experiences are:
(a) long term rates of investment return to be generated by the assets of the Retirement
System.
(b) pay increase patterns.
(c) rates of mortality among members, retirants, and beneficiaries.
(d) rates of withdrawal from active service, including death.
(e) the age patterns of actual retirements.
Actual experience of the Retirement System will not coincide exactly with assumed experience,
regardless of the election of the assumptions, skill and proficiency of the actuary and the accuracy of
calculations made. Each valuation provides a complete recalculation of assumed future experience
and takes into account all past differences between assumed and actual experiences.
45 ♦ SBCERS 2002 Annual Report
ACTUARIAL SECTION
- Assumptions and Methods
The investment return rate used for the actuarial valuation calculations is 8.00 percent a year, net of
administrative expenses, compounded annually. This assumption is adopted by the Retirement
Board. The rate is comprised of two elements:
12/31/00 12/31/99
Inflation (COLA) 4.50% 4.75%
Real Rate of Return 3.50% 3.25%
Total 8.00% 8.00%
Salary increase rates for inflation and graded merit and longevity are as follows:
12/31/00 12/31/99
Inflation (COLA) 4.50% 4.75%
Merit and Longevity 1.00% 1.00%
Total 5.50% 5.75%
The post-retirement mortality tables used were as follows:
Service Retirement Mortality Tables:
General Males 1994 Group Annuity Mortality Table for Males
General Females 1994 Group Annuity Mortality Table for Females, set forward one year.
Safety Males 1994 Group Annuity Mortality Table for Males
Safety Females 1994 Group Annuity Mortality Table for Females, set forward one year.
Disability Retirement Mortality Tables:
General 1981 Disability Mortality Table for General Members.
Safety 1981 Disability Mortality Table for Safety Members.
These assumptions are used to measure the probabilities of members dying after retirement and the
probability of each benefit payment being made after retirement. Related values are shown below.
FUTURE LIFE EXPECTANCY AFTER SERVICE RETIREMENT (YEARS)
GENERAL SAFETY
Age Male Female Male Female
50 30.69 33.94 30.69 33.94
55 26.15 29.24 26.15 29.24
60 21.83 24.70 21.83 24.70
65 17.84 20.46 17.84 20.46
70 14.29 16.54 14.29 16.54
75 11.12 12.90 11.12 12.90
80 8.37 9.71 8.37 9.71
85 6.19 7.06 6.19 7.06
90 4.42 4.98 4.42 4.98
95 3.16 3.51 3.16 3.51
100 2.39 2.50 2.39 2.50
105 1.84 1.83 1.84 1.83
46 ♦ SBCERS 2002 Annual Report
ACTUARIAL SECTION
- Assumptions and Methods
FUTURE LIFE EXPECTANCY AFTER DISABILITY RETIREMENT (YEARS)
Age General
Safety
and
Probation
Age General
Safety
and
Probation
20 38.73 49.29 65 14.07 14.09
25 35.19 44.79 70 11.70 11.70
30 31.98 40.36 75 9.24 9.24
35 29.00 36.02 80 7.00 7.00
40 26.21 31.77 85 5.34 5.34
45 23.57 27.61 90 4.09 4.09
50 21.08 23.59 95 3.07 3.07
55 18.68 19.77 100 2.20 2.20
60 16.37 16.64 105 1.38 1.38
Probability of separation from active service - The following tables indicate the probability of
separation from active service for each of eight separate sources of termination:
Withdrawal Member terminates and elects refund of member contributions.
Vested Termination Member terminates and contributions are left on deposit.
Ordinary Death Member dies prior to eligibility for retirement; death not employment
related.
Ordinary Disability Member receives disability retirement; disability not employment
related.
Service Retirement Member retires after satisfaction of requirements of age and/or
service for reasons other than disability.
Duty Disability Member receives disability retirement; disability is employment
related.
Duty Death Member dies prior to retirement; death is employment related.
Death While Eligible Member dies prior to retirement but after satisfaction of age and/or
requirements for service retirement.
The probability shown for each cause of termination represent the probability that a given member will
terminate at a particular age for the indicated reason. For example, if the probability of withdrawal at
age 25 is .1500, then we are assuming that 15.00 percent of the active members at age 25 will
terminate without vested rights during the next year.
47 ♦ SBCERS 2002 Annual Report
ACTUARIAL SECTION
- Assumptions and Methods
48 ♦ SBCERS 2002 Annual Report
PROBABILITY OF SEPARATION FROM ACTIVE SERVICE
General Members - Males
Sample
Age
Withdrawal
Ordinary
Death
Ordinary
Disability
Service
Death
While
Eligible
Duty
Death
Duty
Disability
Terminated
Vested
20 .16500 .00011 .00000 .00000 .00000 .00013 .00011 .00000
25 .12000 .00017 .00000 .00000 .00008 .00013 .00011 .00000
30 .08500 .00023 .00000 .00000 .00017 .00013 .00022 .00450
35 .06000 .00029 .00014 .00000 .00017 .00013 .00033 .01300
40 .04300 .00034 .00028 .00000 .00025 .00013 .00088 .01200
45 .03000 .00045 .00084 .00000 .00051 .00013 .00165 .01650
50 .02300 .00073 .00182 .04500 .00119 .00013 .00220 .01500
55 .01800 .00124 .00322 .06000 .00230 .00013 .00308 .01000
60 .01300 .00180 .00518 .11000 .00348 .00013 .00385 .00700
65 .01000 .00236 .00798 .29000 .00476 .00013 .00000 .00000
70 .00000 .00000 .00000 1.0000 .00000 .00000 .00000 .00000
PROBABILITY OF SEPARATION FROM ACTIVE SERVICE
General Members - Females
Sample
Age
Withdrawal
Ordinary
Death
Ordinary
Disability
Service
Death
While
Eligible
Duty
Death
Duty
Disability
Terminated
Vested
20 .17250 .00010 .00000 .00000 .00000 .00010 .00012 .00000
25 .13250 .00010 .00018 .00000 .00010 .00010 .00012 .00000
30 .11000 .00020 .00020 .00000 .00010 .00010 .00012 .01000
35 .08700 .00030 .00050 .00000 .00010 .00010 .00024 .01800
40 .05500 .00040 .00068 .00000 .00010 .00010 .00060 .01850
45 .03200 .00050 .00153 .00000 .00020 .00010 .00108 .01900
50 .02600 .00060 .00219 .02000 .00040 .00010 .00144 .01750
55 .02100 .00100 .00286 .05000 .00090 .00010 .00204 .00800
60 .01650 .00180 .00422 .06000 .00140 .00010 .00252 .00400
65 .01500 .00280 .00000 .30000 .00200 .00010 .00000 .00000
70 .00000 .00000 .00000 1.0000 .00000 .00000 .00000 .00000
PROBABILITY OF SEPARATION FROM ACTIVE SERVICE
Safety and Probation Members
Sample
Age
Withdrawal
Ordinary
Death
Ordinary
Disability
Service
Death
While
Eligible
Duty
Death
Duty
Disability
Terminated
Vested
20 .07000 .00007 .00000 .00000 .00000 .00006 .00014 .00000
25 .05500 .00015 .00004 .00000 .00008 .00013 .00027 .01200
30 .03800 .00015 .00004 .00000 .00008 .00013 .00094 .01750
35 .02500 .00015 .00032 .00000 .00015 .00013 .00202 .00950
40 .01500 .00023 .00066 .00000 .00045 .00020 .00360 .00700
45 .00600 .00030 .00088 .00600 .00060 .00026 .00540 .00350
50 .00400 .00045 .00094 .05000 .00082 .00058 .00742 .00100
55 .00000 .00082 .00000 .10000 .00120 .00091 .00000 .00000
60 .00000 .00000 .00000 1.0000 .00000 .00000 .00000 .00000
ACTUARIAL SECTION
- Active Member Data
SCHEDULE OF ACTIVE MEMBER VALUATION DATA
Valuation
Date June
30
Plan
Type
Active
Members Annual Salary
Average
Annual
Salary
% Increase in
Average
Salary
2002 General 3,660 $175,919,988 48,066 9.1
Safety 961 58,763,294 61,148 8.3
Total 4,621 234,683,282 50,786 8.9
2001 General 3,631 $159,944,000 44,050 5.5
Safety 953 53,787,000 56,440 5.4
Total 4,584 213,731,000 46,625 5.5
2000 General 3,503 $146,199,000 41,735 2.8
Safety 930 49,790,000 53,538 4.0
Total 4,433 195,989,000 44,211 3.0
1999 General 3,316 134,680,000 40,615 4.5
Safety 893 45,967,000 51,475 7.2
Total 4,209 180,647,000 42,919 5.1
1998 General 3,234 125,679,000 38,862 3.7
Safety 888 42,637,000 48,015 (.6)
Total 4,122 168,316,000 40,834 2.8
1997 General 3,154 118,250,000 37,492 2.1
Safety 820 39,593,000 48,284 .4
Total 3,974 157,843,000 39,719 1.7
49 ♦ SBCERS 2002 Annual Report
ACTUARIAL SECTION
- Schedule of Retiree and Beneficiary Additions and Deletions
SHORT TERM SOLVENCY TEST
Actuarial Accrued Liabilities for
Portion of Accrued Liabilities
Covered by Reported Assets
Valuation
Date
Active Member
Contributions
(1)
Retirants and
Beneficiaries
(2)
Active
Members
Employer
Financed
(3)
Reported
Assets
(1)
(2)
(3)
12/31/2000 $98,215 $396,275 $651,029* $1,171,138 100% 100% 103.90%
12/31/1999 $90,308 $359,969 $617,100 $1,068,357 100% 100% 100.20%
12/31/1998 $85,113 $318,476 $546,616 $938,295 100% 100% 97.80%
12/31/1997 $79,394 $285,737 $508,493 $799,539 100% 100% 85.40%
12/31/1996 $73,346 $259,044 $426,382 $693,301 100% 100% 84.60%
12/31/1995 $68,581 $236,095 $407,193 $624,823 100% 100% 78.60%
* Excluding benefit improvements.
SCHEDULE OF RETIREES AND BENEFICIARIES
ADDED TO AND DELETED FROM RETIREMENT PAYROLL
Fiscal
Year
Beginning
of Year
Adds
Deletes
Ending
Total
Retiree Payroll
% Increase
in Payroll
Average
Monthly
Allowance
2002 2,128 182 69 2,257 $41,805,316 12.05% $1,544
2001 2,068 126 89 2,128 36,766,740 7.6 1,440
2000 1,974 183 89 2,068 34,176,776 12.0 1,377
1999 1,892 212 130 1,974 30,517,519 12.2 1,288
1998 1,822 164 94 1,892 27,189,813 17.9 1,198
1997 1,759 149 86 1,822 23,067,897 10.5 1,055
50 ♦ SBCERS 2002 Annual Report
ACTUARIAL SECTION
- SUMMARY OF MAJOR PLAN PROVISIONS
SUMMARY OF MAJOR PLAN PROVISIONS
ELIGIBILITY
• First of pay period following date of employment.
DEFINITION OF SALARY
• Highest 12 consecutive months of compensation earnable for General Plan V and Safety Plan IV
members and highest thirty-six consecutive months of compensation earnable for General Plan II,
and part-time members in all plans.
SERVICE RETIREMENT
Normal retirement age
• Age 57 Section 31676.12 (General Plan V), age 65 for Section 31486.4 (General Plan II), age 50
for Section 31664 (Safety Plan IV), and age 55 for Section 31676.15 (APCD Plans I and II).
Early retirement
• Age 50 and 10 years for Plan I, III and IV and APCD Plan II and ages 55 and 10 years for General
Plan II; or 30 years for General Plans I, III and IV and APCD Plan I, and 20 years for Safety and
Probation.
Benefit
• 2 percent of final average salary per year of service (maximum 35 years) plus 1 percent of final
average salary per year of service in excess of 35 (maximum 10 years) reduced by 1/35 of Social
Security benefit at age 65 per year of service (maximum 35 years) for General Plan II, and
• 1/50 times final average salary per year of service for General Plan V, Safety IV, and APCD.
Benefit adjustments
• Reduced for retirement before ages 57, 65, 50, and 55 for County Employees’ Retirement Law of
1937 Sections 31676.1, 31676.12, 31486.4, 31664, and 31676.15, respectively. Reductions for
Section 31486.4 are actuarial equivalents.
• Increased for retirement after ages 57, 50, and 55 for Sections 31676.1, 31676.12, 31664 and
31676.15, respectively.
51 ♦ SBCERS 2002 Annual Report
ACTUARIAL SECTION
- SUMMARY OF MAJOR PLAN PROVISIONS
DISABILITY RETIREMENT
• Non-service connected for General Plans V and APCD.
• 1.8 percent (General Plan V, Safety IV, and APCD) of final average salary per year of service,
with maximum of 33 1/3 percent if projected service is used (age 62 for General Plan V, and
APCD, age 55 for Safety), or 90 percent of the accrued service retirement benefit without a benefit
adjustment, or service retirement benefit (if eligible).
• Service connected for Plans V, and APCD Plan II.
• Greater of 50 percent of final average salary or service retirement benefit (if eligible).
• General Plan II purchases long-term insurance policy.
• 60 percent of salary provided outside of the Plan. Payments are reduced by other disability
income benefits. Service retirement at age 65 (credit given toward service retirement while
disability under the LTD Plan).
DEATH BEFORE RETIREMENT
• Non-service connect before eligible to retire, for Plans IV, V and APCD Plan II
- refund of contributions plus 1/12 of last years’ salary per year of service up to 6 years.
• Eligible for non-service connected disability or service retirement for Plans IV, V and APCD Plan II
- 60 percent of member’s accrued allowance.
• Service connected for Plans IV, V and APCD Plan II
- 50 percent of salary.
• Benefit for General Plan II
- 1/12 of last years’ salary per year of service up to 6 years.
DEATH AFTER RETIREMENT
• $5,000 lump sum death benefit for Plans IV, V and APCD Plan II.
• Service retirement or non-service connected disability
- 60 percent of member’s allowance payable to an eligible spouse for Plans IV, V and APCD
Plan II.
-50 percent of member’s allowance payable to an eligible spouse for General Plan II.
• Service connected disability
- 100 percent of member’s allowance to an eligible spouse for Plans IV, V and APCD Plan II.
- 50 percent of member’s allowance payable to an eligible spouse for General Plan II.
52 ♦ SBCERS 2002 Annual Report
ACTUARIAL SECTION
- SUMMARY OF MAJOR PLAN PROVISIONS
53 ♦ SBCERS 2002 Annual Report
VESTING
• Must leave contributions on deposit.
• Five years of service for Plans IV, V and APCD Plan II.
• Ten years of service for General Plan II.
MEMBER’S CONTRIBUTIONS
• Based on entry age
• Half rates for General V, Safety IV, and APCD Plans I. Full rates for General V and Safety Plan IV
and APCD Plan II. General Plan II is noncontributory.
MAXIMUM BENEFIT
• 100 percent of final average salary for Plans IV, V and APCD Plan II
• Benefit and Social Security combined cannot exceed 70 percent of final average salary if service
is less than 35, otherwise 80 percent for General Plan II.
COST-OF-LIVING
• Up to 3 percent cost-of-living adjustment for Plans IV, V and APCD Plan II
• None for General Plan II.
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54 ♦ SBCERS 2002 Annual Report

STATISTICAL SECTION
- Schedule of Revenues and Expenses
SCHEDULE OF ADDITIONS BY SOURCE
Fiscal
Year
Member
Contributions
Employer
Contributions
Gross
Return On
Investments
Investment
Expenses
Other
Income Total
2002 $10,480,593 $31,759,299 ($57,204,548) ($5,177,584) $4,400 ($20,137,840)
2001 8,458,680 29,346,269 (44,280,522) (8,253,395) 596,247 (14,132,721)
2000 7,348,582 30,057,229 78,590,073 (2,447,083) -- 113,548,801
1999 7,039,762 29,088,462 115,349,949 (2,505,666) -- 148,972,507
1998 5,725,100 30,138,293 171,769,936 (2,460,806) -- 205,172,523
1997 5,145,910 30,638,075 149,579,897 (2,397,481) -- 182,966,401
SCHEDULE OF DEDUCTIONS BY TYPE
Administrative
Fiscal Year Benefits Paid Refunds Expenses Total
2002 $ 46,792,742 $ 885,479 $ 1,715,345 $ 49,393,566
2001 40,775,721 1,144,835 1,523,493 43,444,049
2000 37,537,933 991,089 697,085 39,226,107
1999 33,493,394 893,349 620,626 35,007,369
1998 29,827,368 880,164 409,548 31,117,080
1997 27,352,099 557,461 239,205 28,148,765
SCHEDULE OF PARTICIPATING EMPLOYERS
June 30, 2002
County of Santa Barbara:
General Members 3,554
Safety Members 932
Total: 4,486
Participating Agencies:
Air Pollution Control 60
Carpinteria Cemetery 2
Carpinteria-Summerland Fire Protection 31
Goleta Cemetery 5
Oak Hill Cemetery 4
Santa Barbara Association of Governments 17
Santa Barbara Vector Control 4
Santa Maria Cemetery 8
Summerland Sanitary 4
Total: 135
Total Active Membership: 4,621
56 ♦ SBCERS 2002 Annual Report
STATISTICAL SECTION
- Schedule of Average Benefit Payments
SCHEDULE OF AVERAGE BENEFIT PAYMENTS *
Years of Retirement
0-9 10-14 15-19 20-24 25-29 30+
2001
Average Monthly Benefit $1,764 $ 1,691 $1,218 $911 $648 $602
Average Annual Benefit 21,172 20,291 14,617 10,930 7,775 7,226
Number of Active Retirees 1,113 365 257 270 188 69
2000
Average Monthly Benefit $1,890 $ 1,714 $1,290 $897 $910 $684
Average Annual Benefit 22,679 20,563 15,480 10,768 10,923 8,213
Number of Active Retirees 1,013 311 285 301 132 56
1999
Average Monthly Benefit $1,893 $1,518 $1,168 $865 $778 $710
Average Annual Benefit 22,721 18,221 14,019 10,384 9,331 8,522
Number of Active Retirees 914 313 309 304 125 47
1998
Average Monthly Benefit $1,839 $1,314 $1,058 $834 $741 $735
Average Annual Benefit 22,063 15,762 12,700 10,004 8,895 8,823
Number of Active Retirees 857 309 328 287 102 39
1997
Average Monthly Benefit $1,736 $1,212 $951 $819 $709 $611
Average Annual Benefit 20,832 14,543 11,412 9,829 8,497 7,333
Number of Active Retirees 817 316 345 252 87 34
1996
Average Monthly Benefit $1,672 $1,161 $832 $799 $672 $591
Average Annual Benefit 20,065 13,933 9,985 9,586 8,067 7,089
Number of Active Retirees 776 325 356 211 84 30
*As of December 31
57 ♦ SBCERS 2002 Annual Report
STATISTICAL SECTION
- Schedule of Retired Members by Benefit Type
SCHEDULE OF MEMBERS BY TYPE OF BENEFITS AND BENEFIT AMOUNT*
Type of Retirement **
Amount of
Monthly Benefit
Total
Retirants 1 2 3 4 5
$1-250 37 7 2 0 27 1
251-500 85 13 0 0 69 3
501-750 118 13 6 6 88 5
751-1,000 157 36 7 9 99 6
1,001-1,250 153 12 6 4 126 5
1,251-1,500 166 10 6 3 144 3
1,501-1,750 152 13 21 8 108 2
1,751-2,000 140 42 23 5 65 5
2,001-2,250 138 68 10 4 56 0
2,251-2,500 97 32 7 0 57 1
2,501-2,750 84 21 5 1 55 2
2,751-3,000 132 9 7 1 115 0
3,001-3,250 136 6 3 6 121 0
3,251-3,500 162 7 15 4 136 0
3,501-3,750 113 5 5 2 99 2
3,751-4,000 86 5 10 1 69 1
4,001-4,250 69 5 7 0 56 1
4,501-4,750 50 2 6 0 42 0
4,751-5,000 41 1 4 0 36
5,001-5,250 36 2 34
5,251-5,500 18 2 16
5,501-5,750 15 15
5,751-6,000 11 11
6,001-6,250 9 9
6,251-6,500 8 8
6,501-6,750 8 8
>6,751 21 21
Total 2242 307 154 54 1,690 37
** Type of Retirement
1- Continuance 4- Service Retirement
2- Duty Disability 5- Survivorship
3- Non Duty Disability
* As of June 30, 2002 (QDRO status members are not represented in the table above)
58 ♦ SBCERS 2002 Annual Report

GLOSSARY
ACCUMULATED BENEFIT OBLIGATION: The actuarial
present value of benefits (whether vested or nonvested)
attributed by the pension benefit formula to employee service
rendered before a specific date and based on employee service
and compensation (if applicable) before that date. The
accumulated benefit obligation differs from the projected
benefit obligation in that it includes no assumptions about
future compensation levels.
ACCUMULATED PLAN BENEFITS: Benefits attributable
under the provisions of a pension plan to employees for
services rendered to the benefit information date.
ACTUARIAL ASSUMPTIONS: Assumptions used in the
actuarial valuation process as to the occurrence of future events
affecting pension costs, such as mortality, withdrawal,
disablement and retirement; changes in compensation and
national pension benefits; rates of investment earnings and
asset appreciation or depreciation; procedures used to
determine the actuarial value of assets; characteristics of future
entrants for open group actuarial cost methods and other
relevant items.
ACCRUAL BASIS: The recording of the financial effects on
a government of transactions and other events and
circumstances that have cash consequences for the government
in the periods in which those transactions, events and
circumstances occur, rather than only in the periods in which
cash is received or paid by the government.
ACTUARIAL ACCRUED LIABILITY: The portion, as
determined by a particular cost method, of the total present
value of benefits that is attributable to past service credit.
ACTUARIAL GAIN (LOSS): A measure of the difference
between actual and expected experience based upon a set of
actuarial assumptions. Examples include higher than expected
salary increases (loss) and a higher return on fund assets than
anticipated (gain).
ACTUARIAL PRESENT VALUE: The discounted value of
an amount or series of amounts payable or receivable at various
times, determined as of a given date by the application of a
particular set of actuarial assumptions.
AMORTIZED OR UAAL PAYMENT: The portion of the
pension plan contribution, which is designed to pay off
(amortize) the unfunded actuarial accrued liability in a
systematic fashion. Equivalently, it is a series of periodic
payments required to pay off a debt.
AMORTIZATION: (1) The portion of the cost of a limitedlife
or intangible asset charged as an expense during a
particular period. (2) The reduction of debt by regular
payments of principal and interest sufficient to retire the debt
by maturity.
AUDITORS' REPORT: In the context of a financial audit, a
statement by the auditor describing the scope of the audit and
the auditing standards applied in the examination, and setting
forth the auditor's opinion on the fairness of presentation of the
financial information in conformity with GAAP or some other
comprehensive basis of accounting.
COMPREHENSIVE ANNUAL FINANCIAL REPORT
(CAFR): The official annual report of a government. It
includes (a) the five combined financial statements in the
combined statements - overview and their related notes (the
"liftable" GPFS) and (b) combining statements by fund type
and individual fund and account group financial statements
prepared in conformity with GAAP and organized into a
financial reporting pyramid. It also includes supporting
schedules necessary to demonstrate compliance with financerelated
legal and contractual provisions, required
supplementary information, extensive introductory material
and a detailed statistical section. Every government reporting
entity should prepare a CAFR.
ENTRY AGE ACTUARIAL COST METHOD: A method
under which the actuarial present value of the projected
benefits of each individual included in an actuarial valuation is
allocated on a level basis over the earnings or service of the
individual between entry age and assumed exit age(s). The
portion of this actuarial present value allocated to a valuation
year is called the normal cost. The portion of this actuarial
present value not provided for at a valuation date by the
actuarial present value of future normal costs is called the
actuarial accrued liability.
NORMAL COST: The ongoing annual cost allocated to the
system by a particular actuarial cost method for providing
benefits (future cost). Normal cost payments are made during
the working lifetime of the member.
PENSION BENEFIT OBLIGATION (PBO): The
standardized measure of funding status and progress required
by the GASB to be disclosed in the notes to the financial
statements. It is the actuarial present value of credited
projected benefits, prorated on service and discounted at a rate
equal to the expected return on present and future plan assets.
PENSION CONTRIBUTION: The amount paid into a
pension plan by an employer (or employee), pursuant to the
terms of the plan, state law, actuarial calculations or some other
basis for determinations.
PENSION TRUST FUND: A trust fund used to account for a
PERS. Pension trust funds, like nonexpendable trust funds, use
the accrual basis of accounting and have a capital maintenance
focus.
UNFUNDED ACTUARIAL ACCRUED LIABILITY: The
excess of the actuarial accrued liability over the actuarial value
of assets.
60 ♦ SBCERS 2002 Annual Report