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Budget Analyst Report Sparks More Debate On Pension Reform

Evening Edition

Above: Mayoral candidates Carl DeMaio and Bob Filner discuss the findings of an analysis of the pension reform ballot initiative.

Aired 3/20/12 on KPBS Midday Edition.

GUEST

Lorena Gonzalez, Secretary-Treasurer/CEO, San Diego and Imperial Counties Labor Council

Chris Cate, Vice President, San Diego Taxpayers Association

Note: KPBS Reporter Alison St John mistakenly said in this interview the city will have to pay an extra $54 million a year for the first few years to pay down the unfunded pension liability. The IBA’s report states the ballot measure is estimated to increase costs to the city of $54.1 million for fiscal years 2014 through 2016.

Aired 3/21/12 on KPBS News.

The city of San Diego's Independent Budget Analyst says the pension reform initiative on the June ballot will save the city nearly a billion dollars over 30 years. However, the fiscal analysis shows the savings do not come from the pension reforms.

— A new analysis of the pension reform ballot initiative is igniting tempers across city government.

The report from the city’s Independent Budget Analyst found that while the entire initiative would save the city $963 million over 30 years, all of those savings come from proposed salary freezes, not from moving city employees to 401(k)-style plans.

Congressman Bob Filner, the only mayoral candidate who’s against pension reform, said that’s a problem because salary freezes could be overridden by a vote of six City Councilmembers.

“It doesn’t save a nickel,” he told KPBS Television’s “Evening Edition.” “The referendum itself does not save a nickel. All the savings are predicated on a pay raise of zero percent for the next five years for employees. That is subject to negotiations with the employees, you cannot decide that in the referendum, and it’s doubtful that it’ll ever be zero for five years in a row. It’s a fraud if I could put it most charitably.”

City Councilman Carl DeMaio, who is also running for mayor, has been one of the biggest backers of the pension initiative. He said he is supporting City Council candidates who won’t vote to raise pay.

“The reason why I’m running for mayor, and the reason why I’m supporting certain council candidates, is so that we never are put in a position where politicians override the most important element of this ballot measure, which is capping pensionable pay,” he said.

In a statement, City Attorney Jan Goldsmith said the ballot measure itself does not guarantee employees’ base pay will be frozen for five years.

"The measure sets the city's initial bargaining position in labor negotiations with respect to employees' base compensation,” he said. “That initial bargaining position includes a five-year freeze on base compensation. However, these proposed terms can be overridden by a vote of at least six City Council members."

DeMaio also said the budget analyst did not include important elements in her analysis that would result in more savings for the city.

These include “full and fair contributions by city employees,” meaning employees have to pay the full legally allowable share to their pensions, and an end to “pension spiking,” where city employees add bonus pays, add-on pays and specialty pays to "spike their pensions," DeMaio said.

“That’s very costly, and yet the IBA did not include those savings in her assessment,” he said. “But even with all those exclusions, it saves $960 million over the course of time.”

The budget analyst’s report also found that moving city employees to 401(k)-style plans could cost the city $13 million over 30 years.

But DeMaio attributed that finding to what he called a “watered-down analysis of savings.”

“We believe the 401(k) actually will be saving money from day one, every element of this ballot measure saves money and the IBA took the worst case scenario,” he said.

State Assemblyman Nathan Fletcher, a mayoral candidate who supports the comprehensive pension reform initiative, or CPR, said in a statement that the budget analyst validated the reform’s claim of savings.

“This great news for taxpayers who have made it clear we must reform the pension system,” he said. “Implementing CPR is going to be a long process that will require tough decisions and an ability to bring people together. That is why I released my plan, CPR Plus, last week to save the city money on Day 1. I will work to make six-figure pensions and abuses of the system a thing of the past"

District Attorney Bonnie Dumanis, also running for mayor, originally opposed the initiative, but now supports it.

"As mayor, I will make pension reform a priority and the City Attorney's analysis shows more than ever why we need to pass this reform measure, saving the taxpayers more than $900 million that can be used for city services like police, fire, libraries, parks and streets,” she said in a statement. “The analysis also shows why our next mayor needs to have the proven ability to make touch decisions, work with the City Council and labor organizations to actually implement pension reform. We need real reform, with real savings, that's really going to stick - and that's what I will deliver as San Diego's next mayor."

The IBA report also said the city will have to pay an extra $54 million for fiscal years 2012 through 2016 to pay down the city’s $2 billion unfunded pension liability.

The analysis may be modified within the next week before being officially included on the ballot that voters will read before the June elections.

Comments

Avatar for user 'HarryStreet'

HarryStreet | March 20, 2012 at 2:35 p.m. ― 2 years, 9 months ago

I'm sure the unions, police & fire dept's would like us to believe that pension benefits for city employees won't make a difference. As a taxpayer I don't like being responsible for their retirement benefits. That should be solely on their shoulders. I say this not out of malice or envy, but practical reasons.

Jobs don't pay us enough to look the other way and ignore this. Every penny counts and for police & fire dept, not to forget city councilmen and women are authorizing themselves far too much than can be justified.

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Avatar for user 'Peking_Duck_SD'

Peking_Duck_SD | March 20, 2012 at 5:23 p.m. ― 2 years, 9 months ago

People like Dirty Carl DeMaio and Willard Romney think politics should be only about the rich gaining power.

They are both wealthy people who have made millions (and both have big ethical question marks behind their wealth-hoarding years in the private sector) and decided to run for public office on platforms that favor the rich while taking a big dump on the poor and middle class.

DirtyCarl thinks government should not be composed of working men and women who actually rely on their paychecks like most Americans, but rather super rich corporate hacks who want to continue the demise of the middle class while propping-up the super rich.

Dirty Carl and Willard both believe government is a menace, yet they both want to be elected to government desperately.

That should be red flag number 1.

Personally I view government as a necessary framework for our society and what makes it fail are when dirty politicians like Dirty Carl and Willard corrupt it.

It's not the government that is a problem here, it's the politicians.

Police, fire, and other government jobs are important and warrant wages and benefits that match the risks.

Military personnel are also government workers, does Dirty Carl and Squirly Willard favor cutting off their bennefits as well?

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Avatar for user 'SanDiegoVoter'

SanDiegoVoter | March 27, 2012 at 8:51 a.m. ― 2 years, 9 months ago

I am confused. I think saving money is important, but don't really understand how this CPR works. If we switch all the new employees to a 401k system, they won't be paying in to the pension system anymore. But we (the taxpayers) are still paying the pensions for all of the retired people, and everyone who is currently employed with the city of San Diego who will retire in the years to come, right? So we have less people paying in and the same amount of people collecting pensions (and more every year that people retire), am I (or the taxpayers) paying for ALL of the pension now, instead of just part of it?
How is that saving money?
It seems like it would cost money.
This is very complicated, as a voter I want to understand and make an informed decision at the ballot. Please help me understand...

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Avatar for user 'Studying_Nomad'

Studying_Nomad | March 27, 2012 at 10:33 a.m. ― 2 years, 9 months ago

SanDiegoVoter:

From what I understand we pay 100% of the pension now because a long time ago we did not want to pay into the social security system. So that means when someone retires we pay out their pension. The change to 401k means that we only pay a contribution during the year of employment and any gains or losses to their retirement account is the individual’s responsibility.

Pension = market crashes: SD tax payers responsible for retired employee’s pay.

401k = market crashes: retired employee’s problem.

I agree that we should change to 401k (like the rest of us), but I have a big problem with us not paying into social security, because worst case scenario and the market crashes the employees are not entitled to social security benefits. Whereas I have a 401k, but I’ve also been paying into the social security system. Now, I’m sure plenty will argue that we won’t have social security anyway, but that’s up to us.

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Avatar for user 'SanDiegoVoter'

SanDiegoVoter | March 28, 2012 at 8:03 a.m. ― 2 years, 9 months ago

So, right now the employees do not pay into a pension program?
I thought they did. Like the teachers who pay into their pensions, or State workers (which I was one) paid into their pension fund each paycheck.

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Avatar for user 'SanDiegoVoter'

SanDiegoVoter | March 28, 2012 at 8:34 a.m. ― 2 years, 9 months ago

Studying_Nomad Researching further, I found out that you are incorrect on the SDCERS website it specificall mentions employee contributions. link:https://www.sdcers.org/benefits/active/city/general/Pages/ContributionRates.aspx

"Contribution Rates

General Members are required to make bi-weekly, pre-tax contributions from their paychecks to the SDCERS trust fund."

I want to be smart, not reactionary... Does anyone REALLY know the answer to my question?

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Avatar for user 'Studying_Nomad'

Studying_Nomad | March 28, 2012 at 10:44 a.m. ― 2 years, 9 months ago

Oh I’m sorry, I was only responding from the tax payer liability perspective. Sure they contribute, which would be true under both systems. From what I understand, under the pension system when an employee retires, they are guaranteed x-amount of dollars a month based on their salary. So when the recession hit, the trust that you referred to wasn’t worth as much as it had been the year before, but tax payers were still responsible for the original monthly amount to each person retired. Under a 401k system the individual contributes, the city contributes, and then whatever money is available for retirement (regardless of the market conditions) is solely the responsibility of the retired employee. But as I said before under either system, city employees have no claim to social security. I’m not a city employee so I don’t know the system first hand. I don’t think the fight is over employee contributions.

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Avatar for user 'SanDiegoVoter'

SanDiegoVoter | March 30, 2012 at 7:26 a.m. ― 2 years, 8 months ago

Yes, but what I am wondering is... aren't the working employees who are paying into the pension system now partially funding the retired people collecting pensions? If the partial payments (employee contributions) are sent into a 401K, the taxpayers would foot the bill for the difference, wouldn't they? Maybe I'm wrong. But I thought that it worked like social security (for those that get it) the workers now are really paying for (partially anyway) the people who are retired. When people stop paying into the system someone has to pay for it, or it will go broke.

I don't really know, just asking, trying to understand how this isn't going to cost much more in the short run. We need to be careful with money.
I am all for a 401K system, just wondering about how it would work.

Also, I wonder if the money saved would really be substantial, since there is a hiring freeze in the city and this would apply to new employees only. Lots of questions to be answered before I vote in November.

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