Painting a rosy picture of a pension that wasn't! Sound familiar, STRSers?"

From John Curry, March 22, 2009

Report was rosy, but pension fund wasn't

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TampaBay.com, March 19, 2009
By Sydney P. Freedberg, Times Staff Writer

The people who run Florida's giant public employee pension plan recently distributed a report reassuring hundreds of thousands of workers that their retirement fund was financially healthy and running a surplus.

The plan "was fully funded for the 11th consecutive year, with an estimated $8.7 billion surplus, a major achievement considering the fact that most state public pension funds in the United States are underfunded,'' the report said.

But records show that almost three weeks before distributing the report on March 5, the people who run the pension fund knew that it faced a massive funding deficit.

Documents obtained by the St. Petersburg Times show that senior managers at the State Board of Administration knew about the gap as early as Feb. 16.

That's when an actuary reported his forecast that as of July 1, the fund would have only 78 percent of what it needs to meet its pension promises to current and future retirees.

The day before the SBA sent out executive director Ash Williams' "surplus'' message, he briefed state Chief Financial Officer Alex Sink and two aides about how the pension fund probably would be billions short of full funding by July.

Meanwhile, managers at the SBA kept 964 cities, counties, school districts and other government agencies in the dark about their pension costs' possibly doubling in six years to plug the funding gap.

The SBA says it sent out its most current information, which covered fiscal 2007-2008, and never meant to mislead anybody.

"There's no hiding the ball going on,'' Williams said. "There's no deception.''

• • •

Brenda Bass works in information technology for the Pasco County Sheriff's Office. She is 58, makes about $56,000 and is counting on a state pension of about $1,117 a month.

She took note of the SBA's rosy report about the pension surplus, which was posted on the Sheriff's Office's internal Web site on March 6. A week later, she was taken aback by a Times headline that reported the opposite.

"I guess I will need to try to stay up on my own (pension fund) facts and figures,'' Bass said, "and not trust what I receive on such a 'timely basis' from an agency that we have trusted with our retirement funds.''

The pension fund has lost more than a third of its value since June 2007, dropping from $136.3 billion to $89.5 billion as of March 17. As in most states, retirement benefits for Florida employees are guaranteed by law, so governments have to pay them in full.

What could that mean for the Pasco Sheriff's Office, which has 1,246 covered employees? The agency already is cutting services and recently grounded its aviation unit. Its pension obligation is about $10.5 million a year. If the market doesn't bounce back, six years from now, the agency could see its pension costs go to about $21 million a year.

The SBA said Williams' report was first posted to a state of Florida Web site in January, then distributed as part of an annual update issued every March.

Williams said in an interview that the report sent to Bass and other public servants "used the latest official estimate'' of the funding status, which was as of June 30, 2008.

"The work we're doing here is unofficial,'' he said. "We're doing it to improve our understanding of where things are. It's not a complete analysis. When (the official actuary) does the work, it will be a much more robust analysis.''

Does he think local governments should be given early warning about possible increases in pension contributions so that they have time to prepare for the worst?

"They absolutely are,'' Williams said, and "when we have official information, everybody will be told.''

Bass said state officials should have disclosed up-to-date information, especially if they knew the outdated numbers were misleading. At the least, she says, they should have sent a disclaimer.

"If I'd never seen your article, then I would have thought all was fine in the Land of Oz,'' Bass said. "Go figure. …Our government at work.''

• • •

On Feb. 16, Kevin SigRist, the SBA's deputy executive director, got an e-mail from a consulting actuary indicating that the pension plan probably would not be fully funded on July 1, 2009.

The projection estimated that Florida's pension plan would have just 78 cents for every $1 it needs to cover its pension promises.

Like most states, Florida uses an accounting technique called "smoothing,'' which dilutes the impact of a bad year by spreading out losses over five years. Using "smoothing,'' the actuary's report predicted a funding level of 93 percent, an $8.7 billion shortfall.

Two days later, SigRist and two SBA managers received a draft copy of the actuarial report.

On Feb. 25, the actuary briefed top managers of an eight-member SBA group.

On March 4, Williams briefed CFO Sink about the projected funding gap. Sink, Gov. Charlie Crist and Attorney General Bill McCollum are the trustees who oversee the SBA.

Aides to Crist and McCollum said neither was available for comment. An aide to Sink said she also was not available, but Sink issued a statement that the pension plan's funding decline is "alarming but unfortunately consistent with what other large public pensions are experiencing.''

On March 5, Williams' rosy report of the agency's surplus was sent out electronically to public retirement coordinators to distribute to police officers, teachers, firefighters, social workers, judges, professors and other public servants covered by the pension plan.

On March 6, the SBA staff delivered information about the pension gap to Cabinet aides for the trustees.

On March 9, the SBA communicated the pension gap information to four legislative aides.

On March 12, the gap became public when the actuary and the SBA staff presented the information to a group that advises the agency on investments and policies.

As the actuary began his presentation, he said, "My nickname this year is going to be Dr. Doom.''

Computer-assisted reporting specialist Connie Humburg contributed to this report.