Wednesday, April 6, 2011

Letter to P&I: References to Rauh Study continue to mislead readers

This letter to the editor of Pension and Investments Magazine is from Douglas Rose, a trustee with the San Diego County Employees Retirement Systems.

Your editorial “Politicizing pension costs” (March 7) commended the ongoing public debate over pensions, claiming “the situation is urgent” because “none will be sustainable beyond 2042 even assuming an 8% annual rate of return on investments.” To quote President Reagan, “There you go again.”
The source of your statement about fund sustainability is Joshua Rauh, a Northwestern University professor who claimed such an outcome in a 2010 study. Yet, Mr. Rauh's paper had an intentional omission, assuming as its foundation that no pension fund sponsor would make any payments to pay off their unfunded liability.
P&I knew of this intentional omission when you wrote your recent editorial. You knew because on Nov. 15, 2010, you published a letter from Keith Brainard of the National Association of State Retirement Administrators. He wrote you that referencing Mr. Rauh's paper as “if they are matters of fact, is as misleading to your readers as the studies themselves.” He went on to educate you and your readers on the inherent flaw in the Rauh paper, as well as other faults.
The San Diego County Employees Retirement Association is a fund that Mr. Rauh claimed would run out of money in 15 years. However, plan sponsor San Diego County has consistently paid both the annual required payment, and the amortization payments to pay off the unfunded liability. There is no basis to believe it will not do so in the near future; in fact, in recent years it has paid more than the required amount. With an 8% return rate and yearly amortization payments, our fund will be 100% funded in 20 years.
Your misleading reference to the Rauh study, without qualification, does not reflect well on your paper, which purports to cover and understand public pensions. Let's have the public debate you call for, but let's have it while presenting factual information, not fanciful scenarios designed to inflame passions instead of informing the debate.

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