From Wikipedia, the free encyclopedia - View original article
The San Diego City Employee's Retirement Pension Fund was the source of a multiyear scandal  and has been an ongoing financial concern for the city of San Diego, California. This scandal has been compared to a similar scandal in Bell, California.
Over a period of years the city was under pressure both to allocate less money to the fund, and also to increase benefits to city employees. Problems arose in 2000 and 2001 when the value of investments (and therefore the fund itself) decreased, triggering a safety requirement of further funding. The scandal arose as a result of votes in 1992 and 2002 by the pension board and then the city council that essentially lessened funding requirements and increased benefits (including to several members of the pension board). The underfunding in turn was not disclosed in municipal bond sales until exposed by whistleblower Diann Shipione.
Under Republican Susan Golding the City started the practice of diverting money from the pension fund to increase the city budget. Elected city officials and their constituents cheered on the pension system's foray into the stock market, and during the good years, diverted the system's "surplus earnings" to pay for popular city initiatives, such as the ballpark, the convention center expansion, and for the cost of hosting the 1996 Republican national convention. Now, at a time of "surplus declines," the city is on the hook to make up for the losses. Estimates say that the pension deficit is at $2.1 billion meaning money must be diverted into the pension system. 
In recent years the San Diego City Employee's Retirement System (SDCERS) has invested pension assets in higher risk company stocks. Historically, public pension systems have pursued conservative investment strategies. Until the 1960s, the state constitution expressly prohibited public pension systems from investing their assets in company stocks. In 1966, voters repealed this blanket probation, allowing up to 25 percent of pension assets to be invested in stocks of companies that pay regular dividends. In the early 1980s, another voter-approved amendment removed the 25 percent cap, and allowed funds to be invested in companies that pay no dividends.In an era of low interest rates, public pensions all across the country have increasingly shifted their investments away from bonds and toward stocks. SDCERS has been no exception. Equities have come to dominate the system's investment portfolio, representing almost half of all SDCERS's assets in recent years.
City Attorney Mike Aguirre has filed many lawsuits to roll back benefits but has generally been rebuked by the courts. The scandal had a widespread fallout in the city's politics and financial situation. The pension affair led to the resignation of newly reelected mayor Dick Murphy, who was replaced in a special election by Jerry Sanders; the election of controversial city attorney Mike Aguirre; a complete change of the pension board itself; federal investigations of the bond sales; and criminal charges against several of the pension board members personally. Those charges were finally dismissed by a federal judge in 2010. On August 2, 2011, Terri Webster was cleared on the last charge related to the pension scandal, bringing an end to the scandal seven years after the prosecution started. Webster was the subject of five separate legal actions.