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Pension Costs Decreasing For Some Cities In San Diego County

Evening Edition

Above: Lani Lutar, president of the San Diego County Taxpayer Association, spoke with Joanne Faryon about a new study on cities' pension costs.

Aired 2/28/12 on KPBS Midday Edition.

GUESTS

Lani Lutar, President and CEO, San Diego Taxpayers Association

Alison St John, KPBS Senior Metro Reporter

Transcript

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2012 Regional Pension Comparison

2012 Regional Pension Comparison

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The taxpayer watchdog group San Diego County Taxpayers Association released a new study Tuesday comparing the pension costs in 17 cities in San Diego County.

It found 10 of those cities will see a reduction in pension costs in the upcoming fiscal year. Among the cities with the largest declines are Solana Beach (12 percent decline), Imperial Beach (11 percent decline) and Lemon Grove (7 percent decline).

Lani Lutar, SDCTA’s president and CEO, talked to KPBS about the study’s findings.

“What this means is that cities are going to have a little more money to spend for other things rather than just pension costs,” she said.

Lutar also said some cities will see increases in pension costs, including Del Mar (15 percent increase), San Marcos (5 percent increase), Encinitas (3 percent increase) and Carlsbad (3 percent increase).

Those cities that brought their pension costs down did it by asking city employees to contribute toward their own pensions and moving new employees to lower-cost pension plans, Lutar said.

“They asked employees to finally start paying a little toward their pension costs,” she said. “This is astonishing to many people in the private sector to learn that in these cities, their employees contribute nothing to their pension costs. That’s finally changing.”

This change results in immediate impacts to city budgets, Lutar said, while moving new employees into lower-cost pension plans does not result in immediate budget impacts.

San Diego, which was not included in the SDCTA study, spends 20 to 25 percent of its general revenue fund on its pension plan, according to UC San Diego Ph.D. candidate Vlad Kogan.

Lorena Gonzalez, the Secretary-Treasurer and CEO for the San Diego and Imperial Counties Labor Council, AFL-CIO, responded to the study in a statement.

"There's no question that it's important to budget responsibly and restrain runaway costs," she said. "And, we applaud cities that have addressed the situation at the bargaining table, where these negotiations belong.

"But let's not forget that unfunded liabilities are the self-fulfilling prophesy for corporate interest groups--like this so-called 'Taxpayers Association'-- devoted to reducing and eliminating revenue options. Instead of veiled attempts at forcing struggling San Diegans to accept below bottom dollar for their work, maybe we should talk about how to finally give all San Diegans a chance to earn a decent living."

SDCTA also helped craft the Comprehensive Pension Reform initiative that will likely appear on the June ballot.

Lutar said the plan is “comprehensive” because it not only changes the pension system for new employees, moving them to 401(k)-style plans, but also caps current employees’ pensions according to their base pay.

“Evening Edition” host Joanne Faryon asked Lutar why not move the pension debate in the opposite direction, making private sector employees’ benefits more like those of public sector employees.

Lutar said traditionally, public employees’ base pay was significantly less than that in the private sector.

“But now we’ve observed a significant shift,” Lutar said. She said public sector employees now receive more in base pay, salary and benefits than private sector employees.

If that continues, Lutar said, “we have a situation in which it’s simply unsustainable,” and that will mean less money for providing basic city services or more taxes.

Comments

Avatar for user 'iblistner'

iblistner | February 28, 2012 at 2:04 p.m. ― 2 years, 1 month ago

At about 11:30 into the show, Ms. Lutar stated that the pension costs rose because some state legislation allowed it and cities jumped onto a bandwagon to increase pensions. I would disagree with her on these statements. There are 2 major reasons for this "emergency": One is a change some years ago in Federal regulations which required pensions to be funded as though every member of the program would retire today, a way to require a huge refunding. This was promoted at the SEC by our trustworthy financial institutions. Second was increasing worker benefits by governing boards instead of increasing wages - keeping the apparent cost of labor down while postponing the costs. A third reason for the current push to change to a 401(k) plan is to reduce the power of public pension funds as shareholders.

I would wish that a public service media like KPBS would delve further into this background so the public could get the full story of this current pension "crisis" rather than the somewhat misleading numbers being thrown around the media.

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Avatar for user 'barbgregg56'

barbgregg56 | February 28, 2012 at 2:28 p.m. ― 2 years, 1 month ago

I wish, plead, beg, for someone reporting on this subject to discuss the fact that city workers don't pay into Social Security so for the new hires to just have 401k puts them behind the private sector not equal to it.

Also, please remind the listeners that public employees pay taxes just like everyone else. So there is an interest for everyone to keep the costs down while still providing decent employment.

It would be nice to include public employees in these debates so it can be shared just how much it taken out of each paycheck for pension payments, 401k contributions ( there already is a 401k plan for the city workers if anyone looked into it properly) and salary reductions.

Lastly, everyone talks of wanting services instead of pensions. Who provides the services? People do. People who just want to keep their families fed and housed and not have to live under the OB pier when they get old.

Thank you Alison for at least trying to state, what seems obvious to me, that it isn't the best idea to put everyone at risk betting on the bumpkins on Wall Street.

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Avatar for user 'ronik145'

ronik145 | February 28, 2012 at 5:37 p.m. ― 2 years, 1 month ago

[Lutar] said public sector employees now receive more in base pay, salary and benefits than private sector employees.

My guess is that the reason for this is that private sector employees have been losing ground over the last couple of years. Its not that public sector employees' pay has increased, its that private sector employees pay has decreased.

As a teacher, I pay 8% of my salary to the California Teachers Retirement Fund instead of paying into Social Security.

Many people's retirement funds were wiped out during the last stock market crash. Do we really think its better, as a society, to have a large group of senior citizens who can't retire (thereby not freeing up jobs for the next generation), or who will have to retire with little to no money and will have to depend on the public dole to keep them alive? Why does anyone think this is a good idea?

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Avatar for user 'kaibabbob'

kaibabbob | February 28, 2012 at 6:22 p.m. ― 2 years, 1 month ago

The primary reason the City of San Diego originally adopted defined pension plans for their workforce was that their contribution to that system was less than the mandatory federal contribution to the Social Security System and the City wanted to save money. If you, as a government employer, have a Defined Pension Plan, you are allowed to opt out of the SSI system and neither you as a City, nor your employees have to contribute to SSI. If the pension reform initiative is passed, San Diego City and their employees will again have to begin contributing to SSI at a 50:50 ratio, up to the federally required annual limits. Every employee dollar contributed to SSI will have to be matched by San Diego City and if I’m not mistaken, this is still more than their current contribution. An immediate cost increase will be incurred by San Diego City if the initiative passes and the supporters of the initiative will never mention that fact. It would be informative to ask that question next time you have initiative supporters on the air.

The primary reason the SDPD is not included in the proposed pension reform initiative is past experience showing that when SDPD benefits were not competitive with other police departments, a revolving door of recruits were hired on, were trained by the SDPD for their first year, they then left the SDPD, laterally transferring to other, better benefit providing departments. San Diego City became the Police Training Academy for Southern California. The same thing will occur with the San Diego Fire Department without a defined pension plan. Depending on the recruit classes’ EMT/Paramedic qualification level, it costs $45-60 thousand dollars per recruit to complete the first year of SDFD Firefighter training, a recurring cost the citizens of San Diego will have to bear as firefighters rotate through the training cycle. Just another point never mentioned by the initiative supporters.

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Avatar for user 'Joanne Faryon'

Joanne Faryon, KPBS Staff | February 28, 2012 at 8:37 p.m. ― 2 years, 1 month ago

kaibabbob, thanks for the info about SSI and I agree, I need to ask that question next time. We are also looking into private versus public salaries. We hope to have an update on KPBS Evening Edition Thursday night on the Public Square. And ronik 145, I am very interested in further exploring the question of what we will do as a society if we decide pensions are no longer a benefit of employment. I would really like to see this addressed on our show as a societal and economic issue rather than political discussion.

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Avatar for user 'Katie Orr'

Katie Orr | February 29, 2012 at 2:40 p.m. ― 2 years, 1 month ago

Just thought I'd weigh in. I did a story about a year and a half ago on whether San Diego should opt back into Social Security. Here's the link: http://www.kpbs.org/news/2010/dec/13/...

This story is a bit dated now, but it provides some good background information. I agree, we need to do more on this, especially if the pension reform measure passes.

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Avatar for user 'Joanne Faryon'

Joanne Faryon, KPBS Staff | February 29, 2012 at 9:53 p.m. ― 2 years, 1 month ago

Great story Katie - and great resource in the pension debate.

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