As of June 30, 2004, the funding status of the plan continued to slip, but by just 1%, from 67% to 66%, according to the report. Overall, this means the City’s unfunded liability grew by $212 million in 2004, reaching $1.37 billion. During the year, the value of assets grew by $254 million, while liabilities grew by $466 million, according to a press release.
Factors contributing to the growth of the unfunded liability were a higher number of retirements than had been expected, higher cost of living increases, and revised demographic information, according to the actuarial report.
“The SDCERS Board took actions during the last year to modify actuarial assumptions and increase the cost for city employees to purchase service credit (`PSC’),” said SDCERS Administrator Lawrence Grissom in the release. “A rush of PSC applications at the old rates and the costs associated with assumption changes were expected to increase the unfunded liability.”
The pension fund had a good year investment-wise, growing 20% in fiscal 2004. “As a result of investment performance, the funded ratio on a market value basis increased from 66% last year to 71% at June 30, 2004,” commented retirement board president Frederick Pierce, IV in the release. “On a market value basis, the SDCERS unfunded liability actually declined last year from $1.2 billion in 2003 to $1.14 billion at June 30, 2004.”
“The actuarial valuation process takes many years to fully reflect current market performance,” Pierce added. “Also, the reported improvement in the market value funded ratio of the City pension fund doesn’t yet include more than $520 million in unrealized gains currently held in the system’s investment portfolio.”
The San Diegopension program has had numerous problems since the mid-1990s, when the city decided to intentionally underfund the system (See Officials Admit They Made Mistake in San Diego Pension Decision ). Mayor Dick Murphy made a speech last week, however, that set out goals on how to fix the City’s funding crises (SeeSan Diego Mayor Outlines Pension Reform in Speech ).