Friday, August 12, 2011

Have I proven that the SBCERS Pension Fund should currently be 100% Funded in 2011? Well when you start back in 1986 with a 102% Funded Pension. Than add a 31 Yearly Net Return on Investments of 9.7%. Now When you take all that into consideration how can the SBCERS Pension be anything but 100% Funded? Read this Posting and Find Out for Yourself!

 As I have reported several times before I feel it is mathematically impossible for the SBCERS Pension Fund to have any type of current deficit. My findings have me and others convinced that under no circumstances can there be anything close to a 1 Billion Dollar future unfunded obligation (UAAL). The question then is how do I prove this? 

I have found that many of my postings deal with a subject matter that you might not have thought important the first time I presented them. However because of my repeated attempts at explaining a subject in different ways my concerns have proven to be worthy of your time. I can think of no better example of this than the SBCERS Pension Value for 1986

I must admit I am not surprised that no one has attempted to discredit my findings. I am surprised that more people have not contacted me to meet with them about any of my findings. Now without a doubt I have shown that there exist a serious accounting issue with 1986 and the Pension as reported by Santa Barbara County. Now I want to take this one step further. After all we are taking about a present value discrepancy of at least a 1 Billion Dollars.

How many Police-Sheriff's,Teachers, D.A.'s or Probation Officers would A BILLION DOLLARS provide jobs for. How many Drug Abuse programs or Mental Health facility's could a BILLION DOLLARS keep open? What about Youth Programs they all need additional funding too.

Once again I will review the discrepancies from 1986 and have included documentation that proves my findings to be accurate. But it is the second part of this posting that has me really excited. Now the other day I closed a posting claiming that the SBCERS Pension had earned over 9% yearly for over 26 years. In the second half of this posting I will show you why that is true. So by the time you finish reading this we will have some new things to think about. 

So lets look at 3 key factors that are required for the SBCERS Pension Fund to be considered successful.
1- We need and start with a fully funded pension like we had in 1986.
2- The SBCERS Pension Fund requires an 8% return yearly but has actually earned over 9% net yearly for at least the past 26 years.
3- The County must contribute the minimum amount required yearly but has actually over contribute by 30% for the last 26 years.

And the powers that be would still have you believe that all those factors have created a current 1 Billion Dollar deficit, it is not possible. Today's posting will go over factors one and two and in a future posting I will deal with factor three.

Back in March 2010 I admit this all started out as just a hunch. So I began to do some research and immediately was able to find some discrepancy's with reported pension values. When I compared 1986 & 1996 audits against each other. The 86 audit reported the pension as being 102% funded, while the 96 document reported the 86 pension as being only 67% funded. I also found that originally reported amounts for actuarial accrued liability and actuarial value of assets differed in subsequent years reports. 

 What I need to find was some type of collaborating documentation and data from separate sources. So I could prove which was the correct values for the pension in 1986.  I requested some archived audits from the California State Controllers Office. Once these arrived I would then have coverage from 1978 through 2008. During this time also I searched the Wall Streets Bond Market. I was looking for any documents and data that would have been supplied by Santa Barbara County Officials showing the pension values for 1986.

My efforts paid off when I found this 1992 Santa Barbara bond document on Wall Street that  matched the data from the 1986 Controllers audit.

1985-86 Audit for the SBCERS Pension Fund that exactly matches the bond document above,

You see by using different sources for County data I have proven that the funded ratio for the SBCERS pension in 1986 was 102% funded and was valued at 225 million dollars.

In this July 1st 2009 letter the Santa Barbara Retirement Board responds to the Santa Barbara Grand Jury, addressing their concerns from 2008-09. In their response the Retirement Board appears to almost be gloating on their past achievements. The data found in their response triggered something inside me. Even after 18 months of research I had not realized the relevance of this data at first glance. However after some additional research I knew that these findings would be just as shocking as anything I have already produced.
So I will add some data to the investment returns (1988-2005) supplied below by the Santa Barbara Retirement Board. The years I am including are 1981-87 as well as 09,10 and 11. This will then give us a 31 yearly averaged net investment or book return that will shock and surprise you all I GUARANTEE IT! 
Response to finding 4 (found on page two) “We (the Santa Barbara County Board of Retirement) 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 lost 19.2% in 2009, earned 14.4$ in 2010 and finally earned an incredible 21.8% in 2011.” 
The only data I could find for the years between 1981-1987 was net return @ book value. Now historicallythis percentage reflects about 15% less than net return on market value would. Which is what we will be using from 1988-2011. Because of that fact that book return is historically less than net return I amcomfortable with using the 7 year book return average of 12.9% for the years 1981-87.
Next of course we have the 18 year average (1988-2005) net return on investments @ market value of 9.7%.Those figures were supplied to us by the Santa Barbara retirement Board in 2009.
Than between 2006 and 2011 we had a 6 year net return of investments @ market value of 6.36%. When you combine all this data you get a 31 yearly net return yearly average of 9.77%,  can you believe that?
By reviewing the charts below that I have included we can verify the yearly net or book returns earned by theSBCERS Pension Fund from 1981-2009. Than all you have to do is add 14.4% for 2010 and 21.8% for 2011.
So in the last 18 months I can prove that the SBCERS Pension was 102% funded in 1986. And has earned a combined yearly average net return of 9.77% since 1981. Can anyone challenge these findings? If not than I must assume that you to now believe it is mathematically impossible for the Santa Barbara County Employees Pension to have any kind of deficit and must currently be fully funded!

 Here is a link to the 2006 actuarial experience: study:

As with every picture, graph or chart that appears here on my blog you may double click on any of them and they will open up to their own window. This makes printing or saving the document very easy @

F.Y.I.  The Retirement Program Alternatives Advisory Commissions web page is very hard to get to from the S.B.C.E.R.S. home page. However it is well worth the effort because of the huge amount of documentation that can be found only there. I always try to share any and all resources used by me to create my findings.
Retirement Program Alternatives Advisory Commission

Meeting Agendas and Minutes 

January 27, 2011

December 9, 2010 Meeting

September 30, 2010 Meeting

September 9, 2010 Meeting
August 19, 2010 Meeting

June 10, 2010 Meeting


Materials Requested by Commissioners
002 - BOR - Experience Studies 101 RECEIVED
9A Confirmation and Findings signed
401(a) Plan Doc 2007 Great West
2000 Actuarial Valuation
2002 Actuarial Valuation
2003 Actuarial Valuation
2003 Experience Study
2004 Actuarial Valuation
2005 Actuarial Valuation
2006 Actuarial Valuation
2006 Experience Study
2007 Actuarial Review of Experience Study
2007 Actuarial Valuation
2007 Experience Study Review
2007 Experience Study
Asset Allocation Review and Recommendation
Earning Codes
Investment Policy_amended_12.8.09
MINUTES May 23 2007 FINAL signed
Negotiated Retirement Changes
PCA 1Q10 Performance Report (2).RECEIVED
Retiree COLA Items
Retirement Rate Items
Special Ad Hoc Cola §31874.3b
Board Letter - 3@50

I have also included all the data that can be found under Forms and Publications from the Santa Barbara County Employees' Retirement System web page. I always try to share any and all resources used by me to create my findings.

Forms and Publications 

Health Insurance & Open Enrollment click here.
Retirement System Forms
 Disability Forms
 Retirement Estimation Forms
When Covered Employment Ends
Comprehensive Annual Financial Report (CAFR)
Actuarial Studies 
Retirement Publications 
S.B.C.C.C. The place where COMMON SENSE never goes out of style!

No comments: