Pension Benefits Trial Begins
Wednesday, October 25, 2006
Thursday is opening day in a trial to determine whether San Diego city worker’s pension increases in 1996 and 2002 were legal. It was in 1996 that San Diego’s pension board first allowed city officials to put off paying millions of dollars in contributions into the retirement system. At the same time, the city granted hikes in employee benefits.
That policy was repeated in 2002 and accounts for a huge chunk of the retirement system’s $1.7 billion deficit, a shortfall that has caused cuts in city services and delays in repairs to San Diego roads and its water system. City Attorney Mike Aguirre hopes to convince Judge Jeffrey Barton that those spikes in pension benefits were illegal.
Mike Aguirre: The basis of our claims are that one, city officials who made the benefits had a financial interest, and that financial interest removed the ability to actually bind the city and secondly, they created benefits without creating same-year revenues in violation of the liability limit law of our charter and our state constitution.
But lawyers for San Diego employee unions say the city’s agreements to under fund the pension system were separate from labor contracts that promised benefit increases. They also say it is legal for city officials to vote on compensation for themselves. Aguirre disagrees, adding that rolling back the benefit hikes could save city hall up to $700 million, although that number is disputed by others who put the savings at around $50 million. Still, Aguirre says if the benefit boosts are not reversed, San Diego will likely go into bankruptcy.
Mike Aguirre: When you take the pension under-funding and the healthcare, the city’s looking at a $3 billion deficit. There’s no way that the taxpayers can be saddled with a $3 billion deficit. It’s going to be a very high deficit if we’re able to remove the illegal benefits, but there is no way, in my judgment, that the taxpayers should be asked to pay for what are essentially illegal benefits. It would require, in my judgment, having to go into some type of reorganization.
The first day of the trial is Thursday, but most of the day will be spent on media requests for covering the proceedings. Opening arguments probably won’t begin until Monday.