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Pensionable Pay’ Concept Will Be Closely Watched

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The city once famously labeled “Enron by the Sea” has been getting a lot of positive attention lately for its efforts to reign in pension costs.

— The city once famously labeled “Enron by the Sea” has been getting a lot of positive attention lately for its efforts to reign in pension costs. San Diego is now proposing a revolutionary plan in its war on runaway pensions that could draw even more attention.

On a summer-like day in January, Franklin Lamberth stands next to the garbage truck he drives for ten hours a day, four days a week. Lamberth has been a San Diego sanitation worker for nearly 20 years. He said he wouldn’t want to do anything else. But still, morale in his department is low, and he said his coworkers keep turning to him for reassurance.

"And they come to me because they think I have the answers. And all I can tell them is, through life I roll with it. I’ve had a nice run. I don’t see any promise. I’m trying to make two-and-a-half years,” he said.

In two and a half years, Lamberth can retire with 50 percent of his base salary of $48,000. He’s caught up in the latest battle of what some have called the “Pension Wars.”

City leaders have conceded that earned pensions are a vested benefit and can’t be touched. But the city can control how large an employee’s pension gets by limiting their base salary through pay freezes. The lower the salary, the lower the pension. Workers would make up the lost pay increases in bonuses that wouldn’t count toward their retirement. It’s a concept called “Pensionable Pay” and it was first introduced by San Diego Councilman Carl DeMaio. He said the concept could save a half-billion dollars over the next five years.

“These savings not only stabilize our city’s pension system,” he said, “but the savings will be used to not only prevent future services from being cut, but actually provide monies to restore services.”

DeMaio said his office has been flooded with calls and e-mails asking him to pursue the concept. And he said if the city and its workers can’t negotiate a settlement on the issue, he’ll take it to the voters in 2012. And at least one pension expert said a ballot measure would likely succeed.

“There’s no doubt in my mind that voters would approve it overwhelmingly,” said Dr. Joe Nation, a public policy professor at Stanford University. “That’s what we’ve seen across California, with the exception of San Francisco where they’ve rejected a reform plan. But everywhere else people understand it, they understand the numbers.”

Nation said across the state, retirement funds are in dire straights. San Francisco, Los Angeles County, the city of LA all face massive pension payouts. Sonoma County’s pension fund may run out of money in 10 years. But none, Nation said, are worse off than San Diego. And he said if the city’s groundbreaking pensionable pay concept stands up in court and starts producing real savings, other jurisdictions are likely to jump on it.

But the labor unions are balking at the idea. Joan Raymond is the president of Local 127, the blue collar union which represents workers in the sanitation and maintenance departments among others. Raymond calls the move a political stunt.

“Unfortunately it has kind of become a politically popular thing now to attack labor unions,” she said. “People forget that labor unions are really the only voice for the workers.”

Raymond said the average base salary for her union is $42,000 a year. Instead of freezing pay she said the city should find a way to start charging for trash pick-up which could save $30 million a year. She said if the cuts continue, the quality of city workers will also fall. Stanford’s Joe Nation said though it may hurt, unions should consider negotiating on pensionable pay.

“I think as a public employee you have to wonder, what happens if this does get so bad that my city is forced into bankruptcy? What if they’re forced into bankruptcy? Do I really want to roll the dice with a federal bankruptcy court?” he asked.

Nation said if nothing happens, that could be the case in San Diego. The city’s annual pension payment could reach $500 million in a little more than a decade, or half of San Diego’s operating budget. Regardless of what happens, sanitation worker Franklin Lamberth knows things are changing.

“I’m not going to vilify the taxpayers, the city council,” he said. “You know what I’m going to do? I’m going to feed my family the best way I can.”

And city leaders said they’re doing the best they can, as the pension wars continue.

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