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  #501  
Old 06-12-2010, 06:10 PM
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Ah, the second derivative effects are going to be brutal.
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Old 06-13-2010, 01:28 AM
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So. Who is insuring Mercer for liability now?

That was Alaska for $500MM, and I'll have to look up the Milwaukee case. I would hate to be their insurer.
"Insured" through a captive.
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Old 06-13-2010, 12:06 PM
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"Insured" through a captive.
Oh, duh. Someone told me that when I first posted the Alaska story.

Curious - what state are they domiciled in? Want to be the regulator opining on the solvency of that company?
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Old 06-13-2010, 12:07 PM
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CALIFORNIA
The vote is in, in San Francisco
http://www.sfexaminer.com/local/Prop...-95931439.html
Quote:
A step toward reducing burgeoning pension costs for city workers was approved by voters.
….
Under the measure, the retirement-contribution rate will increase from 7.5* to 9 percent for newly hired public safety workers. Other workers will continue to pay a 7.5 percent contribution. Currently, pensions are based on the highest pay earned in a year. The measure’s formula calculates it on the average of the highest two years.

In years when San Francisco’s contribution to the retirement fund is less than expected — offset by strong returns on investments — The City would put the difference into a special health care trust fund used to pay for retired health workers’ benefit costs. The City has a $4 billion future cost for retiree health benefits.*
Pretty mild reforms, I'd say. Still spiking bait in the benefit formula.

The good part is the contribution discipline.

Ballot proposal in Bakersfield
http://www.bakersfield.com/news/loca...pension-reform
Quote:
Bakersfield residents will vote on whether to reduce pensions for future city employees in November, the city council decided in a split vote Wednesday night.

The local ballot measure proposal put forward by Councilmember Zack Scrivner would reduce pension benefits for city police and firefighters hired after Jan. 1, 2011, but would have no impact on current employees.
….
The measure, if approved, would reduce the retirement benefit for public safety to "2 at 50," or 2 percent of final salary for each year worked available starting at 50 years of age. That's where it was before the council awarded 3 at 50 in 2001.

The measure would also call for new safety employees to pay their full employee contribution to retirement, or 9 percent of salary. The city currently picks up the tab after five years.
Now is the time when we break for the ubiquitous Hitler video parody:
http://www.halfwaytoconcord.com/cali...ension-reform/


After that palate-cleanser, let's see what Calpers has decided... oh, I guess they really do want that money...
http://www.latimes.com/business/la-f...0,195204.story
Quote:
California's troubled, giant public pension fund is preparing to seek an additional $700 million from the state and school districts, after postponing a decision last month because of concerns about the state's massive budget deficit.
….
Lockyer asked for a delay last month so actuaries could look again at the increase in light of the state's projected $19.1-billion budget deficit for 2010-11.
The pension fund's poor investment record over the last few years has forced it to ask for more contributions from the state and school districts to meet its obligations in the coming years. On Tuesday, the fund had $198.3 billion in assets, down 24% from a peak of $260.4 billion on Oct. 31, 2007.
At least three factors are prompting CalPERS to make its already financially strapped member agencies seek more of their taxpayers' money:
The country's largest public pension fund lost about a quarter of the value of its portfolio of stocks, bonds, real estate, private equity and commodities during the severe recession of 2008-09.
On top of that, a new study shows that CalPERS retirees are living somewhat longer and drawing more monthly pension checks.
Third, there has been a jump in the number of eligible employees deciding to retire.
After weighing those factors, CalPERS actuaries concluded that it would be all right for the fund to go ahead with the hike because it wouldn't overly affect the state's general fund. The general fund, currently at $86 billion, pays for major state programs, including health and welfare, education and public safety.
….
CalPERS officials are walking a fine line when they try to come up with the lowest possible increase in the state and school employer contributions, warned Marcia Fritz, president of the California Foundation for Fiscal Responsibility, a pension reform group that is considering sponsorship of an initiative to pare retirement benefits for future state workers.
"They're trying to back into what they think they can afford," she said. "There's a lot of pressure to use aggressive assumptions to minimize the contributions and shove the cost to the future." Those tactics in the past have included assumptions that people will die younger and earn less and that future inflation will be lower and investment returns higher than they actually turn out to be, she said.
Just checking a sec....the actuaries doing this work are employees of California, aren't they? So they shouldn't be in danger of a Milwaukee-type lawsuit, right?



Wait a sec. I thought the last number I heard was $600MM. No no no. It's supposed to work the other way. You threaten to ask for $800MM and then actually ask for $700MM. Even little kids know this tactic! So inept.
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Old 06-13-2010, 12:09 PM
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FLORIDA
http://www.miamiherald.com/2010/06/0...nvestment.html
Quote:
A panel headed by Gov. Charlie Crist approved a revised investment policy Tuesday for Florida's state retirement fund to reduce its reliance on stocks and other equities while adding hedge funds.

The State Board of Administration adopted the changes recommended by a consulting firm, the board's advisory council and its executive director, Ash Williams, a former Wall Street hedge fund manager.

The changes are expected to reduce the $109.5 billion pension fund's risk while increasing its return by $2.1 billion over a span of 15 or more years.
....
Hedge funds have gotten a bad rap as being exotic and risky, Williams said. He said they held up far better than the broad equity average during the 2008 stock market collapse.
….
The board currently has had no hedge fund investments. The revised policy targets 4 percent of the pension assets for hedge funds during the first phase and 6 percent if the Legislature changes the law.
The board now invests 37.4 percent of the pension fund in domestic equities and 20 percent in foreign equities - 57.4 percent combined. The new policy would lump them together as global equities and reduce the total to 56 percent on an interim basis and to 52 percent if the law is changed.
....
McCollum, who is seeking the Republican gubernatorial nomination, and Chief Financial Officer Alex Sink, the leading Democratic candidate for governor, sit on the board with Crist, a former Republican running for the U.S. Senate without party affiliation.

Current law limits what it terms alternative investments, including hedge funds, private equity and venture capital, to no more than 10 percent of the pension fund's investments.

The revised policy puts hedge funds, debt oriented funds and infrastructure investments in a new category called strategic investments now totaling 1.8 percent but with an interim goal of 6 percent and 11 percent if the law is changed.

Private equity is a separate category under the new policy. It will increase from 3.5 percent now to 4 percent in the transitory phase and could go to 5 percent with a law change.

The policy also calls for small reductions in fix income assets and a slight increase in real estate while leaving cash holdings unchanged.

The retirement fund lost value in May but still is up 14 percent for the fiscal year ending June 30, Williams said. He said investment income pays 65 cents of every dollar in retirement benefits paid out or $270 million per month.
Not exactly in trouble, of course.

I'm thinking of just changing this to “Public pension watch”. When I hit 1000 posts again, I'll spawn a new thread.

ILLINOIS
Supposedly about broad public pension issues, but focusing on what's going on in Illinois
http://www.csmonitor.com/Money/2010/...sms_ss=blogger
Quote:
With the worst-funded pension system in the nation, according to the Pew Center on the States, Illinois is a now a testing ground for how to fix the problem.

The challenge is large. In June 2009, accrued liabilities reached $126 billion, $62 billion of which was underfunded. In December, a state commission put the underfunded amount at $77.8 billion.

In April, Illinois Gov. Pat Quinn signed a reform bill that he said would stabilize pensions and save taxpayers $200 billion over almost 35 years. The measure hikes the retirement age to 67 and caps pension benefits. Anything state workers earn above $106,800 won't be included in pension calculations.

But there's a catch: The reforms only apply to new hires starting January 2011. It's a dilemma for states around the country. How much will state governments really cut and how much of the problem will they merely push onto the shoulders of the next generation of workers?
Illinois reforms too tepid?
In Illinois, critics say the reform doesn't go far enough.

The bill offers steps in the right direction but does "nothing to address the immediate crisis for how the state is going to pay for the pension funds this year," says Laurence Msall, president of the Civic Federation, a nonpartisan tax policy think tank in Chicago. He says the state needs to increase the contribution requirements for existing employees to help steady a problem that, if not addressed seriously within the next decade, may lead the state into bankruptcy.

"At the end of the day, the size of the liability is so large it is only going to be major structural changes in the existing funding structures that can help stabilize Illinois's finances," Mr. Msall says.

Changing the pension rules on existing state employees is a political risk, which is why it is hardly broached by legislators who are also beneficiaries of the system. For some states, the solution is not tenable because the pensions are guaranteed by state law.

Veteran employees have the most protections, either because they live in a state where their pensions have a constitutional guarantee or because state courts have established them as a right under common law. Either way, says Professor Brown of the University of Illinois, the courts have legally bound states to keep those pensions intact. So if state money dries up, lawmakers will be forced to make draconian cuts or order big tax hikes to make up the difference. Lawmakers would likely turn to retiree healthcare next, which is not constitutionally protected.
Really, how long do we have to keep beating this horse? I think it's a skeleton at this point
http://www.pioneerlocal.com/pioneerp...010-s2.article
Quote:
For decades, the state of Illinois has put part of its pension tab on plastic, while charging up earlier and more costly retirements without socking away savings to cover the bill.

Lawmakers put off tough choices by making the minimum payments to fund these pensions artificially low, then skimped and skipped payments while the pension debt grew. A few times, the state even borrowed money just to pay the bare minimum.

"For the average family, that's a surefire recipe for personal bankruptcy," former Gov. Rod Blagojevich said in 2005, when the state's pension debt stood at $35 billion, less than half of what it is now. "But that's exactly what the state has been doing year in and year out."
….
State labor groups still contend the state constitution guarantees their benefits.

But the Civic Committee of the Commercial Club of Chicago has a legal opinion that says benefits can be changed for current employees going forward -- that is, for the years not yet worked. Three other law firms have concurred with that opinion.

Critics say that any legislation testing the constitutionality of a rollback in pension benefits for current employees would be mired in court challenges for years to come.
At some point it's going to court. I'm sure there are plenty of lawyers who need jobs... isn't that some kind of stimulus? Why won't anybody think of the lawyers?! Come on! Let's get this show on the road!


Evanston
http://www.pioneerlocal.com/evanston...010-s1.article
Quote:
Evanston taxpayers have been getting a devilish lesson in compound interest -- or more precisely what happens when it's debt, and not savings, that keeps growing all on its own.
For each $1 million the city of Evanston failed to invest in its police and fire pension funds two decades ago, local taxpayers now owe more than $4 million

The math concept has come back to bite municipal officials and their constituents, not to mention taxpayers nearly everywhere.
At last tally, the city of Evanston was behind in its police and fire pension funds to the tune of $159 million, a figure that translates into more than $2,100 per resident.
If the city is to catch up in a little more than two decades, as required by state law, it must ratchet up its pension contributions, which last year accounted for 42 percent of the total property tax levy. City officials predict those increases could require cuts in services.
….
The mistaken assumptions included overestimating investment returns while underestimating pay raises and the number of employees who would choose to retire in their 50s and early 60s. The prior actuary had assumed that one-half of police retirements would occur between ages 65 and 70.
So. Why would the actuary think that they would delay retirement when most public employees retire as early as possible?


Skokie
http://www.pioneerlocal.com/skokie/n...710-s1.article
Quote:
If you want to stir up leaders in Skokie, just mention the village's public employee pension obligations and that should do the trick.

….
Skokie fire employees currently contribute 9.455 percent and police employees 9.91 percent of their pay into the pension system, which is matched by the village.
And Mayor George Van Dusen says the village contributes more than just this match. A sizable portion of revenue from a recently-imposed utility tax, for example, is earmarked for pensions, payments that come on top of the employer match.
The mayor estimates that Skokie pays about two-thirds of the village's police and fire employee pensions when the 42 percent of new utility tax revenue is taken into account.
….
What also doesn't get mentioned, they say, is that in the early 1990s, the actuarial method that funded pensions was changed from equal annual payments to a method called a level percentage of payrolls.
Skokie Fire Pension Board Secretary Dan Collins has made the case that local pension funding has mostly been impacted by negative amortization payments initially determined to be artificially low amounts and by a market downturn -- all due mostly to the change in the funding system that was supported by municipalities years ago.
….
Under the coalition's plan, the age for maximum early retirement benefits increase from 50 to 62.
While I'm sure that underfunding may have hurt the solvency of the plan, I'm thinking the “being able to retire at age 50” may have had a leeeetle bit to do with the costliness.
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  #506  
Old 06-13-2010, 12:09 PM
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MARYLAND
More on Baltimore
http://www.investigativevoice.com/in...ject&Itemid=44
Quote:
Despite a threatened second lawsuit over a bill that would dramatically change the pension system for Baltimore police officers and firefighters, the mayor and City Council moved ahead this week with legislation to close a $121 million budget deficit and preclude retirement payments in excess of $65 million that officials say the city can't afford.
….

At its regular meeting Monday evening the council moved a step closer to averting the doomsday scenario envisioned by Mayor Stephanie C. Rawlings-Blake when she presented her initial budget proposal in late March, followed by her immediate pledge to work with lawmakers to avert the draconian cuts she had just proposed.
Last Thursday the police and firefighters’ unions filed suit in federal court to block changes to the current retirement system under consideration by the City Council that resulted in new pension reform legislation being introduced at Monday night’s meeting.

'THERE WILL BE A SECOND LAWSUIT'
Following the council meeting, Capt. Stephan G. Fugate, president of Baltimore Fire Officers Association Local 964, which represents some 335 fire officers, told Investigative Voice: “If indeed the current [pension reform] legislation [just introduced] is adopted there will be a second lawsuit.”

“We view it as a violation of the contract,” said Fugate, which, according to Rawlings-Blake, is “the same thing, nothing different, from what he’s said before.”

Asked by I.V. if she is concerned about another lawsuit against the pension reform, the mayor sat silently and did not respond.
Well, this should be interesting.

And more
http://www.baltimoresun.com/news/mar...,1409682.story
Quote:
A bill that would drastically alter the police and firefighter pension plan — and, officials say, avert a financial disaster for the city — won unanimous backing from a City Council committee Thursday, despite protests from union members.

The legislation, which consultants hired by the city say could save $400 million over five years, would delay the age at which employees could retire, increase their contributions and replace a benefit that varies with the market with a modest annual cost-of-living increase for retirees over 55.
….


If the city does not change the terms of the pension plan by the end of the fiscal year on June 30, it will be forced to pay $166 million, $65 million more than officials have budgeted.
That extra $65MM will not be paid. Yeah, a lawsuit is going to be cheaper for Baltimore to take on.

Let's hear from the actuaries:
Quote:

Actuaries contracted by the city testified that the proposed bill would bring Baltimore's retirement plan in line with those of surrounding districts and other major cities.

The retirement of baby boomers is challenging municipalities nationwide. Baltimore, like many other jurisdictions, has considerably more retirees than active members, a reversal of the ratio two decades ago.

"Baltimore is not unique," said Mike Nadol, an actuary with Public Financial Management, the Philadelphia firm hired by the city.
Speaking as an actuary currently in financial reporting, isn't it great when you're always the one delivering bad news?

There will be followup:
Quote:

But committee Chairwoman Helen L. Holton said she had met with union officials several times in the previous weeks and that they had only produced the amendments last night.

She appended two amendments to the bill — one that would allow the annual 2 percent cost-of-living increase for retirees over 65 to begin in January, and one that would extend the same annual increase to younger members on full disability.

The measure will go to the full council for a vote Monday.
Check this space next week.

And wasn't GASB supposed to release something by now?
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Old 06-13-2010, 12:10 PM
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NEW MEXICO
http://www.google.com/hostednews/ap/...EiAOgD9G7B7HO3
Quote:
New Mexico's pension program for educators plans to set aside $1.5 million to pay for legal expenses of board members who are facing lawsuits and a pending federal investigation over failed investments.

However, the Educational Retirement Board's reimbursement proposal is coming under scrutiny by a legislative committee, which plans to review it at a hearing Friday. The $1.5 million will come out of pension funds.

The Legislative Finance Committee also is looking at other state investment agencies' policies for indemnifying appointed members from legal claims brought against them.
….
Four current and former educational pension board members have been sued, either in whistleblower lawsuits brought on behalf of the state by a former pension fund investment officer, or in class-action lawsuits by educators and retirees alleging that the pension fund was hurt by bad investments.

The lawsuits allege "pay-to-play" political considerations in Gov. Bill Richardson's administration influenced investment decisions. Administration officials say there's been no wrongdoing and one of the whistleblower lawsuits has been dismissed by a state district court judge. The governor is not named as a defendant in the lawsuits.

A federal grand jury and the Securities and Exchange Commission are investigating investments by the pension fund and the State Investment Council. The target of the investigation remains unclear, but documents have been subpoenaed about a financial firm that advised the state agencies and has been implicated in a New York state pension fund scandal, and third-party marketing agents involved in securing state business for their clients.

NEW YORK
...and the personal pension politics begins in the NY gubernatorial race:
http://statepolitics.lohudblogs.com/...r-his-pension/
Quote:
“It is the height of hypocrisy for Andrew Cuomo to brag about combating ‘double dipping’ when his running mate is a walking, talking, example of abuse,” Lazio said in a statement. “Once again, Andrew Cuomo says one thing and does another. It’s no surprise, of course: Robert Duffy is a politician’s politician and that fits Cuomo perfectly.”
I did think that Cuomo's pension “investigations” would bite him on the ass, but this wasn't what I was envisioning.

And Duffy responds:
http://www.stargazette.com/article/2...police+pension
Quote:
The mayor argued that suspending his pension and going back into the system -- which the Comptroller's Office confirmed is the sole option -- would have been seen as greed. The city would have to resume contributions toward his retirement benefit, which would be calculated on a mayoral salary that is about $18,000 higher than his final average salary as police chief.

Duffy said he had not explored forgoing any of his mayoral salary, though he has declined raises the past three years. As for Lazio, the mayor said, "Mr. Lazio every day is on the attack .... That's great theater. It's great for headlines. It does nothing to solve the problems of this state."
Or he could have “donated” his pension back to the city. I've never heard of any tax authority refusing higher payments than required.

I'm not sure I would want a guy so dim as to not be able to understand all his options for not looking like a hypocrite. [FTR, I don't think he's that dim. He just thinks the voters are.]

And more:
http://www.rochestercitynewspaper.co...ig-deal-or-no/
Quote:
Each camp is defining double-dipping differently. For team Lazio, it's when any public employee leaves a job, takes his or her pension, and then gets another job. For team Cuomo, it's when a public employee resigns and "is almost immediately rehired to the same or similar position in order to receive both a pension and a salary simultaneously for the same work, which is clearly not the case with respect to Mayor Duffy."

This election's just beginning, folks. Expect a lot more parsing and wiggling. And expect the mayor to come under new scrutiny, since the whole of the state's press corps is watching him now.
Ah, semantic quibbling. That's always so much fun.

I have a compromise definition: double-dipping in public pensions is when you are taking pension income from your public job and then get another public job [whatever it is].

I am willing to cut some slack on someone collecting a private pension, and working a public job, and vice versa. See, I'm such a political moderate!

[and Duffy, yes, you're a double-dipper]
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Old 06-13-2010, 08:18 PM
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So I posted about Paterson's thing on [one of] my blog[s].

http://powip.com/2010/06/david-pater...ally-bad-idea/
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Old 06-13-2010, 10:14 PM
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Oh, duh. Someone told me that when I first posted the Alaska story.

Curious - what state are they domiciled in? Want to be the regulator opining on the solvency of that company?
It's probably offshore -- perhaps Bermuda. I'd like to have the opportunity to opine on the actuarial reserves.
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Old 06-14-2010, 10:25 PM
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COLORADO [& MINNESOTA]
Here come the lawyers – cutting COLAs
http://online.wsj.com/article/SB1000..._whats_news_us
Quote:
A showdown is looming over whether commitments made to retirees by government pension funds can be scaled back in dire economic times.

Facing shortfalls, some public pension funds are responding by paring back payouts pledged to retired workers. Earlier this year, pension funds in Colorado and Minnesota curtailed annual cost-of-living increases.
….
In February, Colorado lawmakers passed a bill that reduced the pension system's cost-of-living adjustment from a fixed 3.5% a year to a maximum of 2%—but possibly less for current and future retirees. The new law also increased contributions from employees and employers. For example, retirees who were expecting a 3.5% increase in cost-of-living adjustments this year will receive no increase.

In response, Colorado and Minnesota have been hit by lawsuits filed by retirees, who claim the changes violate state law. Those retirees have "lived up to their end of the bargain, and the state is not living up to theirs," says Stephen Pincus, a Pittsburgh lawyer representing plaintiffs in both states.
First they came for the COLAs.... wait, they did speak up!

This would be the camel's nose under the tent. Because if COLAs can be cut, I bet the benefit formulas can be changed for years of service not yet accrued.

I bet this is going to the Supreme Court. Yippee!

A little more:
Quote:
Some experts say that if judges decide in favor of the retirees, public pension funds will have to find another potentially painful way to bridge the funding gap.


"If benefit promises can't be adjusted, then contributions are going to have to go up a heck of a lot," says Olivia Mitchell, director of the Pension Research Council at the Wharton School of Business in Philadelphia. "It's not likely anybody is going to win here."
Sure, pensioners can win. They just move to Florida and soak the taxpayers of their previous states. There's no way that money could run out, right?

It's not like everyone is going to move out of the state, right? I mean, it's not like those with the most money to tax are the most mobile....

CONNECTICUT
Not really a story of pensions in trouble, I just like stories of corrupt/criminal public employees and what happens with their pensions
http://www.stamfordadvocate.com/opin...ars-519480.php
Quote:
First, to state the obvious, Santorella has not been found guilty of anything. But the issue of whether or not he should get his pension could get thorny if he ever*is.

We suspect we are in the minority when we say even then it would be tough to justify revoking the pension. We admit, our first reaction was: "If this guy stole from taxpayers then why the heck should taxpayers ever pay him*anything?"

That feeling only becomes stronger when considering that Santorella was subject to disciplinary action in the past. But circumstances support his contention that he did nothing wrong*then.

When you put emotion aside, and look at what's at stake, the case for paying Santorella's pension becomes more clear. He worked for this city for many years, and that pension is part of his compensation for those years*worked.

He is accused of stealing $19,000. But revoking his pension would amount to hundreds of thousands of*dollars.
...and, should he be guilty, maybe he should of thought of that before embezzling.

I mean, think of the lost wages of Martha Stewart when she went to jail for a while [not to mention her court costs]... and this was over a deal in which she lost money to begin with. If that's proportionate to her crime, and there are plenty of other money-related crimes where the punishment's economic impact on the criminal is several times of that of the amount involved in the offense... then, not having much sympathy.

Karen Murphy in the comments has a different point of view:
Quote:
The pathetic state of this Administration and the Advocate’s journalism (reporters and editors) is revealed by the handling of, and the reporting on, the alleged embezzlements by Mr. Santorella, the City’s Chief Accountant in practice, and Mr. Manfredonia, de facto HR Department Head. Don’t be deceived by Messrs. Santorella’s and Manfredonia’s titles, look at their actual duties and responsibilities. Both were earning in excess of $100,000 at the time of their arrest. *
*

A reading of Section C7-30-7 of the City’s Charter indicates that if Mr. Santorella is “terminated for cause” he is only entitled to a refund of his contributions. It is my understanding that Mr. Santorella has admitted to wrongdoing. *

*
Further the present value of Mr. Santorella’s pension benefit is closer, if not in excess of, $1 million dollars, not “hundreds of thousands of dollars.” *
Let's see … a government accountant embezzling... yeah, really not feeling the sympathy for such a scenario. He's the guy in a position of public trust, and as such the punishment does need to be a bit out of proportion to the amount stolen pour encourager les autres.

He should be glad he's not in one of the pre-Columbian Central American societies where criminal officials would be put to death for breaking the public trust. But hey, maybe it was all just a misunderstanding.
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