San Diego Settles Pension Litigation

June 8, 2004 ( - San Diego's public pension board has okayed a lawsuit settlement pact with retirees after members voted to clear some trustees of conflicts of interest that might violate California law.

The settlement was discussed in closed session and passed 9 to 3, with one member absent, according to retirement administrator Lawrence Grissom, the San Diego Union Tribune reported. The matter was slated for a closed session City Council meeting Tuesday and then will go to a judge July 7.

The settled lawsuit alleged that a November 18, 2002 vote by Mayor Dick Murphy and a City Council majority to underfund the pension was illegal and alleged conflicts of interest on the retirement board (See  San Diego Approves Pension Reform Committee ). Under the settlement, the city will pump a record $130 million into the system in the fiscal year beginning July 1, and in subsequent years will pay what the system’s actuary says is owed. The retirement system has a $1.15 billion deficit.

At issue in the conflict of interest vote was whether members of the board who are city employees are permitted to vote on matters – such as benefit increases – that will enrich them.

The California Government Code prohibits city employees from having a financial interest in contracts they vote on. Monday, the retirement board approved a resolution that said the City Charter, which establishes the makeup of the board, “abrogates,” or makes null, this section of state law. The reasoning, according to the newspaper: this state law does not apply when the public officials act in a “dual capacity” as public employees and pension trustees.

Of 13 members of the San Diego City Employees Retirement System board, eight are city employees and a ninth is a retired city worker.