Information Regarding the Compensation Recommendations Approved by the SCERS Board
The Sacramento Bee has recently reported on a compensation study that was submitted to the SCERS Board concerning the salary levels for SCERS’ executive staff positions (i.e., the Chief Executive Officer, Chief Investment Officer, General Counsel, Chief Benefits Officer, Chief Operations Officer and Deputy Chief Investment Officer). The attached materials are intended to provide interested parties with the information that was considered by the SCERS Board in deciding to approve the salary adjustments recommended in the compensation study.
In reviewing these materials, SCERS would respectfully ask that the reader keep the following in mind:
- It is not easy or popular to address compensation issues in a tough economic environment, and for that reason, SCERS has resisted doing so for the last few years even though SCERS knew its salaries were falling behind SCERS’ competitive labor market. Unfortunately, SCERS’ hand is now being forced by the need to replace a critical executive team member. Without adjustments to SCERS’ seven year old salary ranges, SCERS will not be able to compete successfully for the professional talent the participants in SCERS want and deserve.
- SCERS is cognizant that the County has been facing budgetary challenges. However, the state constitution imposes fiduciary responsibility on the SCERS’ Board in managing the retirement system, and the fiduciary duty to SCERS’ participants and beneficiaries takes “precedence over any other duty” (Article XVI, Section 17). Accordingly, when presented with difficult decisions, SCERS must act with only one constituency in mind – i.e., what is best for SCERS, its members and beneficiaries.
- If SCERS is not able to maintain the level of knowledge, skill and experience it has had in its key leadership positions, SCERS’ history of success in carrying out its responsibilities will be put at risk, to the detriment of active members, retirees, participating employers and the taxpayers.
- The SCERS budget is fully funded out of the pension trust. The law that governs SCERS limits SCERS’ administrative budget to 21/100s of one percent of actuarial accrued liabilities. SCERS’ administrative budget stands at 9/100s of actuarial accrued liabilities and will remain well below the statutory cap even with the salary adjustments. In addition, actuarial assumptions regarding the cost to administer the system are built into the retirement contribution rates that combine with investment earnings to fund the pension trust. SCERS has historically administered the system at a lower cost than the actuarial assumptions and the salary adjustments will not change this. Accordingly, there will be no increase in retirement contribution rates, and no additional cost to participating employers and employees, as a result of the salary adjustments.
- The salary adjustments will not impact the County’s budget, cause the County to cut services or result in County employees being laid off. By contrast, maintaining a strong leadership team at SCERS will help assure that SCERS continues to be well-funded and prudently managed, which will benefit all SCERS’ stakeholders, including the taxpayers.
- The County’s budgetary challenges have not been caused by rising pension costs. Rather, the budgetary problems have been caused by the substantial drop in residential property values and a broad decline in tax revenue due to the faltering economy. In fact, the annual increase in pension costs over the last five years has only been 1/3 of the annual increase in costs in the five prior years.
SCERS hopes the information that follows is helpful for providing the full and proper context for its compensation decision.