The post in which I credulously presented Dok Harris’ take on city pension fund performance between 2005-2007 has been eliciting significant pushback, and more so since it was picked up by the P-G’s political blog.
So I’ll publish the gist of the criticism here, nice and prominent-like.
One notable e-mail came from City Controller Michael Lamb. Since it came from his office e-mail and was not prefaced the way almost all political e-mails I receive are prefaced (“BRAM THIS IS OFF THE RECORD!!! DON’T YOU DARE BLOG THIS!”) I’ll reproduce it for you:
I was forwarded your entry on this subject and I will follow-up with Mr. Harris but his pension analysis fails to acknowledge one key factor. In the years 2005-2007, the gain pointed to is not the investment performance. In fact, that number represents the performance of the fund after contributions and deductions. The annual cost of the pension system is about $80 Million. In 2005-2007 the city and the employees were contributing about $50 Million. That $30 Million shortfall was made up by investment performance.
In short, the fund did much better than Mr. Harris suggests.
Also, the $120 Million loss is actually a much smaller loss on a percentage basis than the market suffered. I know it’s a smaller loss (percentage wise) than I took on my IRA.
It should be noted that in 2007 we changed pension fund advisors. We have since lowered the expected actuarial return which requires the city to put more money in annually. We have also downsized the number of fund manager we are working with to hold down costs.
There is still a lot to do and the $200 Million infusion will not solve our problems but we actually have had a pretty good investment performance when compared to other public pension plans.
I feel like I should have caught that, teh maths thing.
And it’s true in November of 2007, Mercer Investment Consulting did take over for Hirtle Callaghan & Co., which had been responsible since 1995 (P-G, Rich Lord). Personally I’ve heard this was an unpopular switch among some politically connected Downtowners.
We will see if Dok Harris — who announced in June via Facebook that he re-registered as a Democrat and looks forward to voting in Lawrenceville — decides to hit the ball back.
Additionally, and in response, I asked Michael Lamb on-the-record whether he believes such a $200 million or more (hopefully more!) infusion, though insufficient in itself, is still necessary to “solve our problems” — and if so, where he thinks that infusion should come from; and if not, what alternate courses of action he believes Pittsburgh should take. I will let you know of his response.
*-UPDATE: Lamb responds-
The $200 Million is necessary to get the fund to 50% and avoid the state takeover. I have been supportive of avoiding the state takeover for many of the reasons Dok points out in his letter. I still believe the fund can reflect a 50% funded status by 12/31/2010 while keeping public assets public. Specific proposals on how to do that will be made public after the lease proposals are submitted.
Right, I forgot: only after the bids come in. Though I don’t personally understand that — if Pittsburgh advertises that it has some other workable options, would that not encourage higher bidding and better offers from potential lessors, so as to tempt us away from these alternatives?
**-RELATED: Councilwoman Rudiak offers amendments to the lease deal, which might suggest her mind is open to a lease deal (Trib, Adam Brandolph).