Look at the 20 Net Return on Assets picture above to the right that shows a annual 10.10% return on investments. If that data was added to the graph on the left the line representing 10.10% it would show that 600 million dollars more was earned for the pension than the 8.16%. Then if you add some more money because of the unfunded future pension obligations (UAAL) like I did the pension should have earned a billion dollars more than the 8.16% would have. I have made my own work sheet showing the differences between Santa Barbara County's Pension Assumptions and the SBCERS Pensions Actual Performances.
Now I included three graphs that I made this weekend. In all three examples the Red line is the desired or assumption rate growth the County desired, nice and smooth. But you have to remember if this benchmark is met the pension should then be properly funded depending on the beginning funding level.
The Pink line represents the actual net return on assets earned by the pension which was greater than the desired rate (Red) in all three graphs.
The third Blue line takes into account that the County has represented additional contributions were required because of a constant unfunded future pension obligations (UAAL). By averaging the yearly additional contributions made because of the pension deficit then dividing that number by 12. You get a monthly deposit amount in addition to the multiplied rate 10.10% multiplied by the number of years (20) in a given period. Now in order to show how the monthly deposits affect the funds growth above the actual return rate I added the two factors together. So for example the chart below looks like this starting value of $270,540,000 but adding a monthly for 20 years (H) deposit of 580,000 X 10.10% this would be equal to an ending value of $2.37 billion dollars. Or another way to show this would be 270,540,000 X 11.16% (10.10 plus the effect of the additional contributions)(E) X 20 years is equal the same $2.37 billion dollars.
Regardless of how complicated and confusing my explanation is the bottom line is this. In each graph below the pension funds value ( Pink or Blue) is always greater than the assumption (Red) rate by as much as a billion dollars. You cannot earn more than you wanted, contribute more than you had too, and have your Inflation factor below what you anticipated and have any type of deficit, it is mathematically impossible. So I hope you can understand why I have been working so hard on challenging what the real status of the SBCERS pension fund should be.
I have two other work sheets showing assumptions v. actual earned return average. 19892008 9.6% represents the 20 YEAR NET RETURN ON ASSETS and 19882011 8.5% represents 24 YEARS of NET RETURN ON ASSETS both sheets can be found further down this posting.
20 YEARS OF SANTA BARBARA COUNTY'S ECONOMIC
ASSUMPTIONS
v. ACTUAL (SBCERS) PENSION FUND
PERFORMANCE 19882007

1Using
assumption factor; $270,540,000 X 8.15%
(A) X
20 years = $ 1.34 billion
dollars.
2 Using
Actual Performance Factor; $270,540,000 X 10.10% (E.) X 20 years = $1.94 billion
dollars,
3Same as
example 2 plus a monthly deposit; Again a starting value of $270,540,000
but adding a
monthly (H) deposit of 580,000
X 10.10% which is to earning 11.16% (E) X 20 years = $2.37 billion dollars.
The other work sheets 9.6% represents the 20 YEAR NET RETURN ON ASSETS 19892008
20 YEARS OF SANTA BARBARA COUNTY'S ECONOMIC ASSUMPTIONS
v. ACTUAL (SBCERS) PENSION FUND PERFORMANCE 19892008

1Using
assumption factor; $293,038,000 X 8.10%
(A) X
20 years = $ 1.44 billion
dollars.
2 Using
Actual Performance Factor; $293,038,000 X 9.60% (E.) X 20 years = $1.91 billion
dollars,
3Same as
example 2 plus a monthly deposit; Again a starting value of $270,540,000
but adding a
monthly (H) deposit of 666,000
X 9.60% which is equal to earning 10.75% (E) X 20 years = $2.38 billion dollars.
See the graph below
See the graph below
19882011 8.5% represents 24 YEARS of NET RETURN ON ASSETS
SBCERS 24 YEARS of ECONOMIC
ASSUMPTIONS
v. ACTUAL PENSION FUND
PERFORMANCE 19882011

1Using
Assumption Factor; $270,540,000 X 8.10%
(A) X
24 years = $ 1.82 Billion dollars.
2 Using
Actual Performance Factor; $270,540,000 X 8.50% (E.) X 24 years = $1.99 Billion dollars,
3Same as
example 2 plus a monthly deposit; Again a starting value of $270,540,000
but adding a
monthly (F) deposit of 1,008,000
X 8.50% which is equal to earning 9.79% (E) X 24 years = $2.68 Billion dollars.
See the graph below
See the graph below
S.B.C.C.C. The place where COMMON SENSE never goes out of style!
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