Michael Zucchet, Municipal Employees Association
Lani Lutar, San Diego County Taxpayers Association
Related Story: Does Prop B's Pension Reform Save San Diego Money?
CAVANAUGH: Is this KPBS Midday Edition. I'm Maureen Cavanaugh. It's Tuesday, May 8th. Our top story on Midday Edition, we continue our focus on the issues and races in the June primary election. Today, one of the most contentious issues to face San Diego City voter, proposition B, the comprehensive pension reform proposal. The measure would replace guaranteed defined benefit pensions for most new city hires with a 401 K style retirement plan, and require the city to begin labor bargaining with the position of freezing base pay for current employees for five years. My guests, Michael Zuchett of the municipal employees association, opposed to prop B, welcome to the show.
ZUCHETT: Thank you for having us.
CAVANAUGH: And Lani Lutar is CEO of the San Diego taxpayers association, she is in favor of Prop B.
LUTAR: Always a pleasure.
CAVANAUGH: Now, proposition B is backed by mayor Sanders, Kevin Faulconer Faulconer, your group, the San Diego taxpayers' association, and notably Carl DeMaio. Why do you think San Diego needs Prop B?
LUTAR: Well, all of the listeners are fully aware of the very severe pension crisis that the City of San Diego faces with a pension deficit in excess of $2 billion. What proposition B would do is reform pensions for all city employees as well as politicians. Right now, city elected officials receive the most generous forms of pensions and we believe that needs to change. We believe we need to end pension spiking, that employees need to pay their fair share, and that we have a sustainable system so that the dollars, taxpayer dollars, can go back into core city services filling our pot hole, insuring that we have safe parks, and that we can reopen our libraries so that they are open for our children and for our families.
CAVANAUGH: And Michael, Prop B is opposed by city union, including city fire and paramedics. Democrat Bob Filner, the only mayoral candidate who opposes it as well. Why should nonunion workers in the city oppose Prop B?
ZUCHETT: Well, I think it's interesting when you ask the head of the taxpayers association why to support is what you didn't hear in there is that it saves money. And the reason she didn't say that is because it doesn't. The independent budget analyst said that every single provision of this ballot initiative on a net basis costs taxpayers money over the next 30 years with one exception, which is essentially an advisory opinion to future City Councils to not do pay increases for city workers. But there's no savings associated with that because it's not guaranteed. And so it demonstrates that this is more an initiative about politics than it is about actual money. And the $2.1 billion pension liability that was just mentioned won't be changed at all by this initiative. So this is a solution in search of a problem, and it follows on years of agreements by city workers and the City of San Diego to make reforms that have already been done, that have already saved the money and put the city back on track.
CAVANAUGH: That's my next question to you, I would like to break down the elements of proposition B so that it's understandable to the people who are listening to us. The independent budget analyst found that moving city workers, the part of this that moves city workers from their designated pensions to a 401K style pension plan is not what saves money in this proposal. But supporters have been saying moving employees to a 401K is going to save money. So my question is, were you wrong about that?
LUTAR: Here are the facts. The City of San Diego independent budget analyst, in her own estimate, said that this measure, proposition B, will save the taxpayers nearly a billion dollars over the next 30 years, and over the next ten years, if we do nothing, then costs will increase by more than $100 million. So I understand that the head of the municipal labor union here, Michael Zuchett, wants all of us to believe that proposition B is not going to save taxpayer dollars. But as a City of San Diego independent budget analyst has now confirmed, this measure will save over -- nearly a billion dollars, and that's all money that's going to go back into the city services I described previously.
CAVANAUGH: But to be clear, that savings does not come from moving employees to the four 0 one K plan
LUTAR: The savings comes from a combination of the components within the measure. This is a comprehensive measure which includes moving individuals to the 4 zero one K plan, as well as freezing the calculation by which the perceptions are going to beicalulated for five years. So it's a combination of all of it. Nothing in this measure is going to increase costs as Michael would like to have your listeners believe. This is only going to save the taxpayers money and it's understandable that the labor unions, including the municipal employees' association would want to preserve the status quo.
CAVANAUGH: I will go to Michael in a minute. But I'm a little confused. The independent budget analyst did say that moving workers to eye 4 zero one K would cost the city about $13 million in the first years
LUTAR: What it actually does is escalate the costs. It's kind of like paying your credit card debt down faster. Within the first ten year, it will save 1 had been million dollars, and that has been confirmed by the analyst.
CAVANAUGH: Freezing city workers' salaries, you mentioned this, Michael, this initialive in and of itself does not freeze city workers' salary; is that right?
ZUCHETT: That's correct. Even the proponents of the initiative acknowledged when they were creating it that that would be illegal. And so I would just take some issue with -- and the listeners don't have to listen to Lani and I argue about it, they can go to the independent budget analyst's document themselves and they will see that the analyst did not quote unquote confirm any savings from this. She said if that happens in the next five years, there would be savings. But this initiative does not do this. There is no five-year salary freeze in this initiative, even though the proponents advertise it.
CAVANAUGH: This initiative recommends, however, that the city start their bargaining position with a five-year freeze on pensionable pay. And that is where these savings come from; is that right?
LUTAR: There is a component of the savings that comes from freezing the calculation for five years; is that correct. But again, there are various components of this measure, which is what makes it a robust, comprehensive initiative, and if that was all the measure was, it would be one thing. But this measure is more than that. It also is going to insure that pension spike category no longer occur in the future, that politicians can't have the most generous pension benefits which they have right now, reforms benefits for all employees, and the elected official, something that would not happen without proposition B. In fact, if it would have happened, we wouldn't need proposition B. But that's why we came together with the various elected officials, including mayor Sanders to bring the voters the opportunity to insure that the City of San Diego will have a fair system for the taxpayers and the employees, to insure that we're going to have a sustainable system, and one with predictable payments because now with proposition B, taxpayer costs will be capped. That means that instead of having the wild fluctuations and volatility that come in the pension payments right now as a result of stock market impacts, we're going to have much more predictable payments moving forward, and be able to save taxpayers nearly a billion dollars, money that goes back to city services.
CAVANAUGH: Michael, let me ask you, it's your position, I believe that you think this initialive will hurt city employees. Most private sector workers don't have anything like a designated benefit pension. They have 401K plans. So why would having the same thing hurt city workers?
ZUCHETT: Well, for starters, unlike most of your listener who is have Social Security, city employees do not have Social Security. The City of San Diego got employees out of the Social Security system 30 years ago. And so the notion that most members of the private sector have a modest 401K and Social Security is true, and they say, well, why not city employees? Well, because city employees do not have Social Security. So that was the whole point of a defined benefit pension. And for new hires, in the City of San Diego, those reforms have already taken place, beginning in 2005. And I find it really interesting that Lani talks about that you need this proposition to go after these Egregious elected official employee benefits. The last time I checked, the politicians don't have a labor union, they don't even have a contract, they're at-will employees. The City Council including Carl DeMaio and mayor Sanders and the other sponsors of this initiative could have changed that literally with a snap of their fingers five years ago. They don't need to have a proposition where they take down ten thousand other employees who don't have that elected official retirement system, and for the proponents to use that as some sort of justification for doing to the ten thousand what you want to do to the ten, why not just have our elected officials act as they should have for the last couple of years?
CAVANAUGH: I want to give Lani a chance to respond, but one more question to you, Michael, before that. And that is San Diegans have heard for years about pension problems, pension payments busting our budget, making it impossible as Lani is saying to provide city services, etc. With that background, what are the reasons you say people should vote against proposition B and continue defined benefit pension for city workers.
ZUCHETT: The No. 1 reason is there's no savings. And components of it actually cost taxpayers money. No. 2, it's illegal. And we didn't get into that today. But there will be endless litigation on this. It takes the city back down a path ala our previous city attorney who went for the Haley Mary paddles in the Courts, creating cost uncertainty for taxpayers and employees. But the main reason, is over the last seven years, seven years of pay freezes by city employee, the elimination of ten or 15% of all city positions Eric 6% compensation giveback in 2009 that continues today. The refmation of all kinds of benefits. The retiree health deal that saves taxpayers $800 million that is being put up by Lanny's organization later this month as one of the finalists for the golden warmup dog of the year award, this is the way we make progress in the city, by sitting down. When you go this route, you're only doing it for political reasonses, and the best example that you have of that is a mayoral candidate that is running only on this initiative.
CAVANAUGH: Lani, your chance to respond. Michael said for these inflated, if they are inflated, pension benefits for elected officials, the City Council has the complete right to change that now. They don't need this initiative
LUTAR: Well, he's correct. But there are a lot of things in this initiative that could have been passed by the council. The problem is, they haven't taken that action, which is why we needed to put together a citizen initiative. There are also components within the measure that will require a charter change. So this initiative does more than just even implement those changes that the council would have made. I want to go back to a point on Social Security. It should be clearly understood that the City of San Diego employees voted to opt out of Social Security a number of years back. And there is nothing in proposition B that prevents the city from reenrolling in Social Security should they decide they want to pursue.
CAVANAUGH: Except money
LUTAR: No, this measure has a cap on taxpayer costs, but again if the city want to reenroll, as long as it's within that cap established that protects taxpayers that we know how much the payments are gone be, retirement cost payments are going to be moving forward, they will have that opportunity to reenter Social Security. The proponents of proposition B have made it very clear that we don't have a preference one way or another, if city employees want to reenter Social Security, that's great. That opportunity will be there for them. So again, while Michael. S to say that we don't need this measure because the council could just take all of this action, that's what we've been advocating for many years, but they have not taken the steps that are necessary to reform the pension systems for themselves and for all employees to the level that is needed to insure that we have a sustainable system moving forward so that taxpayer dollars can go back into the community to also insure another aspect of this, that the labor unions like to pretent doesn't exist, if you have that stability in payment, you wouldn't have to lay off as many employees because you would have more money to be able to go back into keeping those labor doors open, beingational to hire employee, to fix the roads. So the unions really should recognize that this is going to allow for that stability, and it is fair to employees and the taxpayers.
CAVANAUGH: Could employees just decide to go back into Social Security if Prop B passes?
ZUCHETT: No. And the proponents can't even tell you that the IRS would let the city choose whether or not its employees are in Social Security or not going forward. Even the city's COO has admitted this. So they're flying by the seat of their pants on this. Going back to the vote, as Lani said, employees did agree to leave solar security in the 80, but they did so in return for a supplementally pension savings plan, which both have been eliminated with the support of the taxpayer association. The other thing that the council could do is to fund the benefit, ranch over the last ten or 20 years, diverting money from the pension system into ball parks, stadium expansions, the Republican National Convention, and other things that the so called taxpayers association has supported. And so now when the bill comes due for all of that, suddenly all of it falls on the city employee, all of the deals are suddenly 1-sided even though there was always other sides to all of those agreements. And we get 1-sided political ballot initiatives that do nothing to actually fix the problem but do everything to support the political careers of certain people.
CAVANAUGH: I have to end it here, but I want to give you both about 30 seconds, if you could, to kind of wrap up your thoughts as to pro and con, Lani, why should people vote for Prop B?
LUTAR: It's going to save taxpayers nearly a billion dollars. This is money that can go back into our communities, fixing pot hole, reopening the labor libraries, insuring that our communities are safe. We need to end this pension crisis once and for life, insure that pension spiking can no longer occur, that we have a fair system for employees and the taxpayer association, proposition B is going to allow us to do that, and insure that taxpayers will be protect would moving forward.
CAVANAUGH: And Michael?
ZUCHETT: Well, the good news about all the turmoil in the City of San Diego over the last five or seven years is that we're way ahead of the game with respect to pension reform. It's why mayor Sanders has announced a structurally balanced budget for the first time in decades and going forward, surpluses on the horizon. It's because of the shared sacrifice of is the city and particularly its employees, and all the concessions that have been done by agreement. Any time we get into the notion ever extreme litigation and ballot initiatives, it doesn't do anything. Proposition B is a continuation of that. A waste of taxpayer money and time. And vote no on B.
CAVANAUGH: I want to thank you both.