Good News For Financially Strapped San Diego
Thursday, January 13, 2011
San Diego's annual pension payment is far lower than expected. But the long-term picture is not so rosy.
SAN DIEGO San Diego has gotten some rare, positive financial news. The city’s upcoming pension payment is $231 million, a lot lower than was projected.
SDCERS June 30, 2010 Actuarial Valuation
The report from the San Diego City Employees’ Retirement System found San Diego's annual pension payment to be about $26 million less than the city was expecting. But it also said the pension fund is only 67-percent funded.
A recent five-year financial plan had pegged San Diego’s upcoming pension payment at about $257 million. But newly released projections by the city’s pension board put the payment at $26 million less. Council President Tony Young said that’s a great sign for the city, which is facing a $71 million deficit in the coming year.
“Every year we have to pay a certain amount to address our pension issues. And this year $26 million less that we have to pay means $26 million more we can put into services that the city of San Diego needs to provide.”
There are already ideas for how to spend that money, most of which will go into the city’s general fund. Frank De Clercq is president of the San Diego Firefighters Union. He said the city’s been browning-out some fire engines for nearly a year and it’s time to restore them to service.
“We found this $26 million and it was estimated to be part of the (pension) payment and it’s figured into the budget,” he said. “I certainly think it’s the right thing to do at this point to take $11.5 million of that and restore these eight engine brownouts.”
De Clercq said citizens want fire services restored
But it wasn’t all good news on the pension front. The report from the San Diego City Employees’ Retirement System also said the pension fund is only 67-percent funded. That could threaten the fund’s ability to pay future benefits. Young said the unfunded liability is like a rope around the city’s neck and needs to be brought under control
“We have to find a way to cut our pension obligations and find ways to pay for those so that we can get that to a more respectable level when it comes to percentage,” Young said.
Along those lines, city leaders will hold a news conference on Friday to discuss reducing the pension obligation by freezing employees’ base salaries. The lower the salary, the lower the pension cost for the city.
Mayor Jerry Sanders and Councilman Kevin Faulconer are also backing a ballot measure that would eliminate pensions for all non-public-safety new hires and switch to an all 401(k) system.
Sanders has been criticized for the plan because San Diego does not participate in Social Security. Labor groups argue switching to a 401(k) without a pension would leave city workers without a safety net. Sanders said he’s considering options so employees do have a retirement supplement.
“We believe new employees can get into Social Security. So that can be the safety net with the 401(k),” he said. “Or, if it’s to our benefit, we can provide a small defined benefit that mirrors Social Security out of our retirement system.”