By Stephen Young
By Stephen Young
By Stephen Young
By Jim Schutze
By Rachel Watts
By Lauren Drewes Daniels
But if he didn't go public right then with the projection of a shortfall, Stalnaker did decide to bring some allies into the controversy.
Stalnaker's first move, apparently, was to get his case before the Texas State Pension Review Board, established 14 years ago to ride herd on the 156 public employee pension funds in Texas that control some $90 billion in assets.
On June 30, 1996, Larry Eddington, a review board member and Stalnaker ally, wrote a letter asking that the board bring Stalnaker to Austin to brief the board on the Dallas situation.
Although the board has the power to issue subpoenas, hold hearings, and make recommendations, it has no direct power to dictate policy to a pension fund's trustees. But it can provoke publicity and highlight problems.
Eddington, a police officer and chairman of the Dallas Police & Fire Pension Fund board, was appointed to the panel by Governor George W. Bush. In his June letter seeking Stalnaker's appearance, Eddington appeared to already know that questions had arisen about the Dallas fund, and that state involvement might be needed.
"Our prompt action in this matter will be a positive influence taken outside the passions of persons involved in the day-to-day management," Eddington wrote.
Behind the closed doors of Dallas City Hall, passions were indeed running high.
In July--even as Randy Stalnaker was bringing Austin officials into the fray--John Ware was building his own case to argue that the pension fund was fine, and to raise questions about the performance of the trustees.
Ware's office began compiling the travel records of the trustees, while he looked for an actuarial firm that would bear out his assessment of the fund's solvency.
By August, Ware had commissioned the actuarial firm of Conrad Siegel, a Harrisburg, Pennsylvania, outfit, to review the Towers Perrin findings. Ware's office had asked the city's outside auditors--KPMG Peat Marwick--for recommendations, and KPMG's list of possibilities described Siegel as "extremely experienced but possibly with smaller-sized plans" than Dallas'.
In his earliest communications, Conrad Siegel, the founder of the firm, appeared to make it clear that he could see things Ware's way. On July 30, for instance, Siegel sent a fax to Assistant City Manager Mary Suhm discussing the fund's soundness. (City officials turned over copies of the fax and other pension fund-related documents to the Dallas Observer in response to a public records request. Suhm's office delayed releasing the documents past the legal deadline for responding to a request, and turned them over only under persistent pressure.)
Siegel scrawled his fax to Suhm before he had landed the $200-an-hour contract or done any lengthy review of the pension fund's books. Yet Siegel referred to the Towers Perrin report as "gobblegook [sic]." Later, in an August 5 letter, Siegel referred to the supposed shortfall as "an inconvenient item for the City to budget in 1996."
Suhm insists Siegel was chosen because of his qualifications as an actuarial advisor, not for political reasons. Siegel's opinions on the politics of the situation are something he simply offers free of charge, Suhm says. "I don't pay for that," she says.
By October, Siegel's report for Ware was ready. Stalnaker sensed that something was wrong when Ware scheduled an October 16 briefing from Siegel, but explicitly excluded the trustees from the meeting. "That worried the heck out of us," concedes Stalnaker. "My honest feeling is they wanted to discredit the board."
Randy Stalnaker had no intention of sitting back and letting Ware ambush him with the Siegel report. On October 31, 1996, Stalnaker says, he visited editorial writer Henry Tatum at the News. More than a month later, on December 4, the News published an editorial headlined "Retirement Fund: Council must act to avoid pension crisis."
Stalnaker had pushed the fight into the open. Stalnaker also continued pressing his case with the Texas Pension Review Board in Austin. With Eddington's introduction, Stalnaker had briefed the panel in mid-September, but he had come home with no firm commitment from the board to look into the matter.
On November 26, Stalnaker asked the panel to accelerate its inquiries into the situation. "This request is urgent because of the upcoming presentation to Dallas City Council on this issue that is scheduled," Stalnaker told the state agency.
Stalnaker's lobbying paid off with an extremely helpful letter from the state oversight agency. In a December 5 letter, Don Reynolds--a Smith Barney stockbroker and Bush appointee who serves as chairman of the board--wrote Stalnaker that the board agreed that Ware's assumptions on the fund's rate of return were too high. "The Board does not think it would be prudent to use 9.25 percent with all other actuarial assumptions unchanged," Reynolds wrote. It may seem an arcane point, but for Stalnaker the letter was a godsend--an outside, seemingly independent body had sided with him.
Unfortunately for Stalnaker, the politics of the state review board quickly changed afterward. Eddington, who had been responsible for putting the Dallas case before the board, recused himself from any further discussions. In a letter to Reynolds, Eddington acknowledged the appearance of a conflict since he is a trustee for the Dallas police and firemen's pension fund.
Reynolds, the review board chairman, has also since eased his previous opinion of the fund's finances. Since sending Stalnaker the letter in November, Reynolds says he has changed his mind--although not the board's official position--about the Dallas employees' plan. He now says he might look favorably if the fund assumes a higher rate of return--from 8.75 to 9 percent. Reynolds says he has changed his mind, in part, after hearing from Ware's office.