Documentation that the SBCERS Pension was 100% Funded in 1986!

    Let me start today by sharing one of the many positive emails I received after my last posting dealing with our 2011-12 County Budget. You must understand that regardless if my blog and thoughts shared on it are read means nothing.  Many times my view on a particular subject is new to most of you and only after repeated fact filled postings do I gain a REAL following. I think the most difficult part for me is that my work must be worthy of my readers valuable time. Since most of them are currently involved in their own special projects, be it Mental Health, Drug Abuse or Gang Intervention I must show the connection between my work and theirs. To be honest I was waiting in the tall weeds for this Years County Budget process to run its course.

“Larry, Keep up your tireless good work! Hoping to see you over there at the Board of Supervisors testifying in front of the cameras!  

  

 Thank you for your kind words and you where awesome at the Board meeting by the way. These pension issues affect many California County’s. In June of 2000 Ventura County's pension had a reported value of 2.1 Billion dollars and today that value is only 2.7 Billion. Even though Ventura County has contributed an additional 1.5 billion dollars to their pension since 2000.

  I am just getting started with my review of the California Public Pension funds. This week I paid for an additional 20 years of pension records from the California State Controllers office covering 10 Counties. I can now go as far back as 1978 and really give a solid fact based review.  I plan on repeating my audit process with all 10 Counties, the money is huge and belongs to us the public. Thank you for your reviews and positive support. Just think what you and your group could do if properly funded!”

  Over the past 3 months I have been fortunate to see that the Internet Links to my blog have more than double and now exceed 9000. Below is one such link that has ties to L.A. County employees and their pension LACERA!  

 

http://feelingthefutureqr.blogspot.com/2011/06/santa-barbara-criminal-court-corruption.html “LA County Employees, Please Vote For Kevin Miguel Norte, Candidate, LACREA Board of Investments, Seat Number Two, August 2, 2011 Los Angeles County Employee Election, endorsed by CA Assembly Speaker Pro Tempore Fiona Ma, Los Angeles City Councilmember Paul Koretz & Oxnard Harbor Commissioner Jason Hodge Governor's Committee on Employment of People With Disabilities member Don Norte AFSCME Local 910”

  Let me be clear here I am not questioning if there is fraud with the SBCERS pension funds past and present reported values. I am presenting facts complete with supporting documentation that was prepared by Santa Barbara County which challenges all reported pension fund values and verify s FRAUD.

 I was able to pull the data used next from a  July  1^st 2009 Santa Barbara County Board of Retirement’s response letter, addressing concerns from a 2008-09 Grand  Jury report;

Response to finding 4 (found on page two)

“We disagree wholly with the finding. As reported in the 2006 actuarial experience study, as of June 2005 the fund’s 18-year compound average net return on assets was 9.7%. Since that time the fund earned 10.8% in 2006 and 17.2% in 2007, and lost 7.1% in 2008.”  

   

    Well please correct me if I am wrong but doesn't that translate to a 21 year compound average net return of 9.3%.? This  indicates that the assumed rate of 8.16% was in fact achieved over the last 21 years.  Please keep in mind that the county was also over contributing to the pension fund by 30% during the same time. So again I ask how can the current market value of the SBCERS pension funds be1 BILLION Dollars underfunded as reported in the June/11 Grand Jury report. Here is the link to the response letter for your review.

http://www.sbcgj.org/2009/responses/SBCERS_Response.pdf

This next report on the County's financial status clearly states that the SBCERS Pension was 100% funded way back in 1986.

If you are reviewing this posting @ www.santabarbaracriminalcourtcorruption.blogspot.com

you can double click on any picture and it will open up to a new window.

http://magicinsantabarbara.files.wordpress.com/2010/10/bond-1-91-92-sbcounty.pdf

http://magicinsantabarbara.files.wordpress.com/2010/10/bond-1-91-92-sbcounty.pdf

You can find this data on page 79 of this file marked B-27 . This document clearly shows that the SBCERS pension was 100% funded as of 1986.

 If the above document is correct  and the SBCERS pension was 100% funded in 1986. Why is the reported funded ratio for the SBCERS fund reported at only 67%. below? The next question we must ask ourselves is to  bring the 100% value and math forward from1986 to present and what will you find? You will find a fully funded SBCERS pension fund that comes almost 1 Billion dollars over funded just as I have previously reported.

This document reflects a 67% funded SBCERS Pension. How does this not match a document that is on file with Wall Street?

In closing let me present two different accounts of how the SBCERS pension suffered a loss of over 87 Million dollars back in 2000. For some reason even after 20 different types of audits and valuations Santa Barbara County Auditor Controller Robert Geis felt compelled to produce yet another version explaining the past poor performance and missing fund value in 2006. He claims the cost of these benefits created new liabilities for past service estimated by the actuaries to cost $87 million to the fund.

The only problem with that is the 87 million dollars had also been reported as a loss in the SBCERS 2000 Actuarial Valuation. Take a look at the 2000 valuation below and you will see the market loss and how it was reported for yourself. You can see that it contradicts the data I pulled from the California State Controllers office below.

Public Retirement Systems Annual Report Fiscal Year 1999-00

Santa Barbara County Employees Retirement System

As of 06/30/2000 ……………………………….Beginning of Year Net Assets

Net Assets Available for Benefits………………..Held in Trust for Pension Benefits

……….1,252,219,393……………………………1,176,896,699..(06/30/1999)

 

Summary of Funding Position……………………………………………..Average Yield

12/31/2000 ……….1, 171,138,000………………102.2% Funded…………...6.6%

12/31/1999………..1,068,357,000……………….100.1%Funded…………...11.8%

12/31/1998………..938,295,000…..….…………..98.7%Funded……………21.6%

12/31/1997……….799,539,000…………………..91.5%Funded……………10.2%

Clearly a 6.6% return was reported on investment to the State but wait there is more. For some unknown reason this 2000 Valuation also reports a loss of almost 300 million dollars under the category;” Loss Realized Gains Through December 2000 (298,489,919.00)”  This is impossible since the County’s 5 year market rate of returns on Investments ending June 200 was an astounding 14.8%. Not to be knit picky but the 5 year smoothing of the funds represented in the 2000 Valuation incorrectly reports the amount and positive investment gain for one particular year. I would provide more pictures and documentation to prove that statement but lets be honest do I really need too? 

 Below you will find a portion of Robert Geis's 2006 letter as well as the 2000 valuation ledger that I have concerns with. I know that there is a ton of information to absorb here but please remember that just with the concerns for 2000 we are talking about almost 400 million dollars. Conservatively if you only doubled that amount you would be talking about an 800 million dollar cash fund for your special needs projects. If you take nothing else away from this posting let it be that in 1990 Santa Barbara County officials reported the pension was 100% funded in 1986.  

 County of Santa Barbara Office of the Auditor Controller County Retirement (SBCERS) Cost “White Paper” by Robert Geis C.P.A.

http://magicinsantabarbara.wordpress.com/2011/06/15/how-many-different-reports-and-valuations-can-we-have-for-our-2007-sbcers-pension-fund/

Case in point: In 1999 the County was 100% funded per the actuarial value method and 117% funded ($180 million surplus) per the market value method. At that point decision makers decided to improve both active member and retired member benefits using surplus earnings to pay the benefits (a part of the $180 million surplus). The cost of these benefits created new liabilities for past service estimated by the actuaries to cost $87 million.

http://magicinsantabarbara.wordpress.com/2011/06/15/590/

SBCERS 2000 Actuarial Valuation

You can find this data on page 37 of file marked page 33 of this report

The 2011 Santa Barbara County budget deficit and how the SBCERS pension fund plays a role with it.

          Well I just do not know what to think about our Santa Barbara Board of Supervisors

 and how they handled this years 2011/12 County Budget. The budget was extremely difficult since it came with a 72 million dollar deficit, but what would you say if I told you that deficient should have totaled 90.4 million dollars?  The Supervisors do have prior budget deficit experience since in 10/11 that budget also came with a 42 million dollar deficit. That year’s shortfall had been reduced by 21.1 million dollars? So how was it our County Government able to reduce their past two year’s budget deficits by over 39 million dollars? Just think what additional cuts would have had to come had those reductions not been made? Let me share with you how those unseen reductions to the budget deficit came about.

    In 2008/09 the Santa Barbara County Employee Retirement System experienced significant losses to its investment portfolio. This resulted in an increase to the unfunded liability for the system and its member agencies. In 2009 the Retirement Board reviewed there current policy as well as 4 options developed by its actuary for addressing this liability. At the September 23rd/09 meeting of the SBCERS Retirement Board Option 2 was unanimously passed by both SBCERS staff and the County of Santa Barbara, as the most viable solution to address the SBCERS investment losses. You may review the 4 options that appeared before the board in this report; Item 6E Staff Report @

http://magicinsantabarbara.files.wordpress.com/2011/06/item-6e-staff-report-re-sbcers-investment-losses.pdf

  Basically what the Retirement Board did was to change policy and lower the payment required by the County against any future unfunded liability to the pension fund. The recent losses were so great that the practice of smoothing investment gains and losses over a 5 year period was not enough.

  Now for the bad news; because of the actions taken by the Board of Retirement in 2009 Santa Barbara County’s obligation to the pension fund was increased by an additional 1.5 Billion dollars through 2028. So I took the time to create a chart that compares the two policies side by side. The chart will allow you to compare what effect the two policies have on the county contribution rate, unfunded balance and funded ratios. The last column will show the difference in millions between the two policies and how it affects that year’s county budget.

  If the Retirement Board had not made those policy changes in 2009 the pension was scheduled to overcome the current 676 million unfunded liabilities and be 100% funded by 2028. This would have come at a cost of almost 3.2 Billion dollars in contributions by the county

 Based on the current Alt 2 option chosen by the Retirement Board in 2009 the pension will only be 85% funded in 2028. The unfunded liability will have grown from its current to 670 million to 878.4 million dollars even after 2.95 Billion in County contributions to the pension fund. I hope you can begin to see why this is so important to us all.

 Now before I could even publish this posting the current Santa Barbara Grand Jury issued a new report on the pension crisis yesterday. In this report they took the time to show the market value of the current unfunded obligation is actually at 1 billion dollars and not 670 million. We are in serious trouble but I leave you  with this.

. Since 1988 the SBCERS pension fund has achieved an 8.0 yearly return on investments. The Normal contribution rate since then averaged out to 12.0% and that is rounding up rather heavy. The actual contribution rate paid by this county since 1988 has averaged 17.1 % a full 30% more than required. When you add that according to documents taken from the WALL STREET bond market which shows our  SBCERS pension fund was 100% fully funded  in 1988, THAN HOW CAN WE CURRENTLY  BE UNDERFUNDED AT ALL?

  Employee Contribution Rate (ECR)Comparison

Fiscal Year Beginning	ECR 2009 Policy	UAAL 2009 Unfunded Balance Millions	Funded Ratio	Current 2011 ECR from Alt 2	UAAL 2011 Unfunded Balance Alt 2	Funded Ratio Alt 2	Unseen Savings to County Budget
2008	23.06%	244.5	88.7%	23.06%	244.5	88.7%	0
2009	23.30%	588.2	74.2%	23.30%	588.2	74.2%	0
2010	33.23%	606.9	75.0%	29.02%	606.9	75.0%	-21.1 Mil.
2011	34.14%	660.7	74.1%	28.82%	676.2	73.6%	-18.4 Mil
2012	36.00%	819.6	70.1%	29.97%	855.9	68.8%	-22.1Mil
2013	40.50%	910.2	68.7%	33.39%	973.0	66.5%	-27.1 Mil
2014	43.38%	880.0	71.4%	35.18%	976.6	68.3%	-32.5 Mil
2015	43.59%	837.7	74.5%	34.44%	965.4	70.2%	-37.7 Mil
2016	43.54%	771.8	77.5%	33.52%	961.9	72.0%	-43.9 Mil
2017	43.47%	702.5	80.6%	32.64%	954.4	73.6%	-48.2 Mil
2018	42.13%	623.2	83.6%	31.79%	946.4	75.2%	-48 Mil
2019	39.22%	538.3	86.6%	30.97%	938.5	76.5%	-39.8 Mil
2020	35.74%	456.0	89.2%	30.21%	931.8	77.8%	-27.8 Mil
2021	33.83%	380.5	91.4%	29.46%	924.5	79.0%	-22.9 Mil
2022	32.95%	304.8	93.4%	28.76%	917.1	80.1%	-22.7 Mil
2023	32.86%	224.1	95.4%	28.09%	910.6	81.1%	-26.9 Mil
2024	32.88%	133.1	97.4%	27.46%	904.0	82.0%	-28.8 Mil
2025	27.14%	30.1	99.4%	26.86%	897.4	82.9%	-1.6 Mil
2026	22.01%	0	100%	26.28%	890.6	83.6%	+ 27.1 Mil
2027	14.20%	0	100%	25.73%	884.4	84.3%	+ 73.1 Mil
2028	14.20%	0	100%	25.21%	878.4	84.9%	+75.6 Mil
Totals		0	100%		878.4	84.9%	-266.8 Mil

    

Pension Report
updated: Jun 23, 2011, 2:20 PM

Source: Santa Barbara County Civil Grand Jury

The majority of public agencies in Santa Barbara County do not know the status of their long term pension obligations. Because these county agencies use large, multi-employer pension systems, their contributions are pooled and their fund status is not separately reported. These are among the findings of a recent report on post employment benefits from the 2010-11 Santa Barbara County Civil Grand Jury.