Mendocino County Employees Retirement Association

Meeting 3/18/09

Supervisors Smith and McCowen arranged a meeting with me and MCERA Administrator Jim Andersen and former Administrator Tim Knudsen for 3/18/09. The purpose was to discuss the issues I've raised about the County's Pension Debt, MCERA's investment performance, and other matters.

I sent a memo - "Questions to Discuss in the 3/18/09 Meeting" to the two Supervisors and MCERA Administrators a week before the meeting. (Click to see a copy of my memo - pdf file - 400KB)

MCERA released the results of a survey of other County Retirement Systems that morning (next page). It showed that MCERA was in the upper range of returns over the five years ending June 2008. I received a copy an hour before the meeting.

The first half or more of the meeting focused solely on MCERA's report. Then when I was finally able to get the group's focus on my memo, it quickly became apparant that most hadn't read the memo, and none had spent one minute preparing to discuss it.

However, in our discussions for the next hour several important things emerged. The next page discusses MCERA's Report and then I go on to discuss those important things.

These are the topics in my memo and generally the questions I asked. If you don't want to spend the time, just go to the next page.

3/18/09 Meeting Memo Topics

1. MCERA Investment Returns: I provided Investment Return calculations based on SCO data and MCERA's own audited financial statements. I also showed the Returns reported in MCERA's own Actuarial Report for 6/08. They all show MCERA's Returns over the 1996-2005 period were significantly below their target. I provided the SCO Public Retirement Systems Analyst statement that my findings are "logical and reasonable". I asked Do you agree or disagree with this data and these findings?



2. MCERA's Reported Investment Returns for Healthcare and Pension Funds:I showed calculations of the Investment Returns from MCERA's audited statements for these 2 separate funds. The results show wildly different returns. I asked Are these audits accurate, and if so, how could the returns for these two funds be so wildly different?



3. MCERA Payements of Healthcare - Was it Legal?: MCERA paid over $15 million in retiree healthcare benefits and said it came from "Excess Earnings". But if MCERA's Investment Returns were below its target over that 10 year period, how could that be? I asked What was the source of funds for that $15 milliont?



4. Unfunded Pension Obligations Increased Almost Every Year: I provided a graph that showed that the County's underlying Unfunded Pension Obligation increased every year from 1994 through 2005. I asked Do you agree that MCERA's performance increased the County's Pension Debt in each of these years?



5. Increased County Pension Debt and Payments Next Year: I provided projections showing that the County is likely to be forced to pay an additional $3 to $10 million next year because of MCERA stock market losses this year. I asked Has MCERA or the County projected whether or not the County will be forced to pay millions more Pension Debt payments next year, and when the County says it's facing an $8 million deficit next year, does that include increased Pension Debt payments?