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DeMaio Outlines Financial Recovery Plan

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Aired 11/5/10

Pay cuts on top of pay cuts? Eliminating retiree healthcare? Massive changes to the pension system? Are city workers going to go for all this? That’s what San Diego Councilman Carl DeMaio's much anticipated five year financial plan calls for.

— Pay cuts on top of pay cuts? Eliminating retiree healthcare? Massive changes to the pension system? Are city workers going to go for all this? That’s what San Diego Councilman Carl DeMaio's much anticipated five year financial plan calls for.

Councilman Carl DeMaio presents his five-year financial plan that he said will solve San Diego's structural budget deficit.
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Above: Councilman Carl DeMaio presents his five-year financial plan that he said will solve San Diego's structural budget deficit.

DeMaio said his plan would save San Diego more than $1 billion over five years and would close this year’s projected $72 million shortfall. It calls for reducing city salaries by up to 8.5 percent immediately and then locking those rates in for five years. It would also create several pension tiers for employees to choose from. But perhaps most controversial item is DeMaio’s plan to eliminate retiree health benefits for current city employees.

“I’ve discussed this with the city attorney and he has informed me that he’s confident retiree healthcare reforms can be implemented and that we will prevail,” DeMaio said.

DeMaio said he anticipates push-back from city labor unions on that issue and he likely won’t be disappointed. Michael Zucchet is the General Manager of the San Diego Municipal Employees Association, the city’s white collar union. Zucchet maintains retiree healthcare benefits are vested, meaning they can’t be taken away. And he said even if the benefit were eliminated for current employees it still wouldn’t totally take care of the city’s $1.3 billion unfunded retiree health liability.

“You can’t eliminate for the people who’ve already retired and those people represent a huge portion of the unfunded liability of the city,” Zucchet said. “Even if you eliminate it for active employees today, you still have $700 to $800 million that you have to keep funding.”

Zucchet said city unions have already made major concessions. “The unions have agreed to five years of pay freezes. They unions have agreed, in the last contract, to a six percent compensation cut across the board. The unions have agreed to essentially have the citywork force reduced from 11,000 to 8,000 employees.”

If the unions are unwilling to accept the changes he’s proposing, DeMaio urged the City Council to impose them. A majority of the City Council is backed by labor, however. DeMaio also proposed three ballot measures to cap spending and labor costs for five years, mandate pension reform and create a "lock box" for surplus revenues.

Councilwoman Donna Frye said she would not support completely eliminating retiree healthcare. She said if the city moves forward on that front it won’t be resolved quickly. “Some of the options (in DeMaio’s plan) are going to end up in court, and that will take years.”

Frye said she believes the city should move forward with the reforms associated with Prop D, the failed sales tax initiative. She said there’s already a coalition built up around those measures that give them support. If DeMaio’s proposal compliments those reforms then it should be incorporated, Frye said.

DeMaio said he does not believe the city should file for bankruptcy. But he said his plan does borrow some elements of bankruptcy.

“Such as a five-year plan, such as a public vote to require and bind city leaders to follow that plan,” he said.

Mayor Jerry Sanders, who met with DeMaio on the plan this morning, said he welcomes "all good ideas" to help the city address its budget challenges. "Some of the suggestions presented today are interesting and should be examined," Sanders said. "To that end, I will forward them to the Citizens' Fiscal Sustainability Task Force and ask that they be looked at to determine their practicality, legality and effectiveness in tackling our financial challenges."

The city’s Budget Committee will meet next week to begin the process of addressing San Diego’s $72 million budget deficit.

City News Service contributed to this story

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