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DeMaio On Pension Reform Measure

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November 9, 2011 12:59 p.m.


Carl De Maio, San Diego City Councilmember

Related Story: Voters To Decide On San Diego Pension Reform


This is a rush transcript created by a contractor for KPBS to improve accessibility for the deaf and hard-of-hearing. Please refer to the media file as the formal record of this interview. Opinions expressed by guests during interviews reflect the guest’s individual views and do not necessarily represent those of KPBS staff, members or its sponsors.

CAVANAUGH: This is KPBS Midday Edition. I'm Maureen Cavanaugh. It's Wednesday, November9th. Our top story on Midday Edition, the plan to end guaranteed pensions for most San Diego City workers has qualified for the June2012 ballot. The plan first put forward by mayor Jerry Sanders and councilman Kevin Faulconer Faulkner has become the central theme of another councilman's bid for mayor. Carl DeMaio has worked hard for this initiative to get it to the ballot. Good afternoon.

DEMAIO: Good afternoon, Maureen

CAVANAUGH: You really did work very hard to get this plan to end pensions for city workers on the ballot. I think I had three robo calls from you on my answering machine asking me to sign the petition, you know, part of that whole campaign that you did. Why is this such a critical issue for you?

DEMAIO: It's been an issue for me for the past 7, 8years. When I was a government watch dog and a private businessman, I was looking at the city's pension system and telling city officials, hey, this doesn't add up, it's not sustainable, and it's certainly not defensible to be giving people the high pension payouts that city employees receive. Then a year ago tomorrow I actually was the one who laid out this pension ballot measure concept. And at the time, people said, wow! We never thought you could actually reform existing employee pensions. And certainly it's pretty politically bold if not suicidal politically to say that we should move everyone to 401K defined contribution accounts. As you researched, the mayor and Kevin Faulconer Faulkner had a separate ballot measure that they released after I laid out my plan. I'm grateful they put their plan aside and joined our coalition so we could move forward as I united team to advance pension reform. And this has taken the past year to get it on the ballot, including a coalition of the Lincoln club, San Diego county taxpayers' association. We did an analysis of what percentage came from every political party, a third of the signatures were Republicans. A third were independents, and a third were Democrats. And it came from every socioeconomic group. So we really believe that this is a consensus on the part of San Diegans that they want to see reform and change in city finances starting with the pension system

CAVANAUGH: When I got those calls from you on my answering machine, the first thing I thought of is who's paying for this? Who paid for that kind of intense campaigning?

DEMAIO: Well, I've been raising money into our unified campaign committee to support the ballot measure. I put my own money into this ballot measure as well, about more than $100,000 now. And of course I've used my own campaign money for my race for mayor. Maureen, this is my solution to the city's financial problems. I'm not waiting to be mayor to get things done, which is why some political observers would say, hey, it's pretty risky for you to have a mayoral campaign that you should be focused on and a ballot measure campaign simultaneously. Hey, just focus on yourself. Well, that's not the way I am. I'm actually interested in getting things done. And that's why we had to decide that we would move forward with the ballot measure as well as move forward with a campaign for mayor.

CAVANAUGH: In the months to come, councilman DeMaio, we are going to be talking at great length about the specifics of this pension reform ballot measure, whether parts of it will survive legal scrutiny, now the laborer unions will argue against the measure. We'll be doing a number of shows on that. But right now, I want to talk about some general aspects of the ballot measure and your support of it. Sort of ironically, this week, the San Diego City Council learned that the pension obligation for the next fiscal year is going to be lower than expected. That of course is without this measure. I'm wondering how did that happen?

DEMAIO: Well, actually it starts to incorporate this measure. First of all, the pension payment will likely go up, if not stay about the same, which at $230million plus is nothing to be happy with. We're on our way to close to $500million annually in pension payments. When you look at the percentage of payroll that goes into retirement cost, it's much higher than the private sector by a factor of 3 to 4. What good news did we get? The retirement system is starting to take a look at our pension ballot measure, and even before it's approved by voters, they're starting to incorporate some of the likely savings that the ballot measure would require. And in this case, freezing the pensionable pay of city employees that are currently in the pension system produces millions of dollars, tens of millions of dollars annually in savings

CAVANAUGH: I'm wondering if an analysis like that makes you go back and analyze the numbers that you're using for the city pension deficit to promote the ballot measure. I mean --

DEMAIO: What we do is we always update the numbers based on the last actuarially forecast, but the reality is we are in a pension system that is completely unaffordable, and indefensible when you look at the individual payouts to have a pension system to allow people to retire at a standard retirement age of 50 or 55 for blue color and white collar employees, and allow people to actually earn more in pension payouts than they actually earn indeed salary while working, that is indefensible and it's also financially unsustainable. So you really have to obviously adjust numbers based upon the ups and downs of the market, and changes in actuarial predictions. But none of those small changes changes the ultimate conclusion that the city has to make a change, and we have to go to defined contribution accounts

CAVANAUGH: Which brings me to my next question. It seems to me that this pension reform measure is both a practical and an ideological issue for Uand for some of the supporters of this ballot measure. Would you agree with that?

DEMAIO: Oh, I wouldn't agree at all about the ideology because we have such a broad coalition. San Diegans step think forward from every political and socioand economic background. It really is a practical matter. When you look at the city's financial problems, when you look at the cuts in our services from libraries to parks to 911 response to the decay in our infrastructure or our roads that are falling apart, all of those issues are related to the increasing pension payment. Now, in 2004, our pension payment was roughly $40million. Today, it's $230million, and it continues to be projected to increase. So we have to make the change from a practical standpoint without pension reform. You don't fix the financial problem, and without fixing the financial problems, we can't provide the quality of our services that our neighborhoods require

CAVANAUGH: Isn't there also another element to this? You've often said it's unfair for city workers to have a better pension plan than private sector workers. Would it be unfair even if the city could afford it?

DEMAIO: Oh, absolutely. I think that city employees should receive no matter, and also let me stress, no worse than what the taxpayers footing the bill receive. And that's why I've always called for bench marking salaries and benefits, including pensions, against the local laborer market. You should be paid using taxpayer money no higher a salary and benefit than what you would be paid for doing similar work in the nonprofit or private sector locally. And the sad reality is that in government, we are seeing higher salaries, higher benefits than what would be paid in the private sector. And there is basically universal job security in the public sector. Whenever we have a general fund production, the city transfers that person instead of laying them off, transfers that person into the enterprise fund. We find another job, they get bumped. So there's a lot of challenges, problems, financial and operational, in the way that the city currently pays and manages its staff. And I'm hoping as a businessman to breed a new sense of performance based philosophy and equity, fairness, into that system on behalf of taxpayers


CAVANAUGH: Just recently, however, with the occupy movement, we've noticed in the government accounting office came out with the numbers that support the idea that wages are not going up for most of Americans.

DEMAIO: Right.

CAVANAUGH: So therefore, if you tie city worker pay to what private sector people are making, then everybody is on a downward spiral.

DEMAIO: I would challenge that. What you want to do is tie your pay to what the local laborer market requires in order for you to recruit and retain quality staff. At the end of the day, Maureen, I am -- my philosophy is that the city government is a service provider, and we're doing a really bad job right now of providing services. We're not providing library hours the way we should, park and rec programming, we're not fixing streets. One of the major ways of fixing that problem and saving money is to bring the salary and benefits down to a level necessary to recruit quality workers. Anyone who's ever run a business has to understand that concept, that you need to pay a competitive wage so that you win the war for talent. But if you pay more than the competitive wage you're really wasting your money. And that's something that we've not seen in government, that's something as mayor and as part of that ballot measure I hope to bring to city government

CAVANAUGH: Let me change gears a little bit. We had former mayor dick Murphy on our show recently and reviewed how city leaders promised city workers pension benefits instead of increased pay. And how the decision was made by counsel members to approve under funding the pension. Given that history, there have been a lot of criticisms that this pension reform measure forces city workers to suffer the sequences of a situation they did not create. How do you answer that?

DEMAIO: I think that is a fair commentary because the people who created this mess are the union bosses and the city politicians. The rank and file city workers really probably had no knowledge of what was going on until they got a notice in the mail saying hey, guess what? Good news! We got extra benefits for you. They rely on their union leaders and the city elected officials to make the right decisions on their behalf. Unfortunately, both parties, the union leaders and city politicians, failed our workers, and they failed our taxpayers. That's why my focus has always been not on the individual city employee, because they're not the problem. It's the system that I have an obligation to reform. Not only to protect taxpayers, not only to provide services to our neighborhoods, but also to provide a retirement and an ememployment package that city workers can rely on. As a businessman, I won't be able to provide a service, and that's how I see my job as mayor. I won't be able to lead the city and provide a service if I cannot provide for my employees. The problem here is that there have been promises made that we simply cannot keep. They're unsustainable. And that's why we need to make these reforms. We have to have a dose of reality.

CAVANAUGH: Now, councilman DeMaio, you're a candidate for mayor. And the mayoral primary is? June of 2012. That's just when other pension reform initiative will be on the ballot. Do you expect that's going to help you politically?

DEMAIO: Well, I expect that the challenge put before voters will be clear in that if you want pension reform, you can't just vote for the ballot measure itself. Although that's a good start. We've seen ballot measures, initiatives, and referenda overdone by collective officials time again. If you want real pension reform, you need to not only vote for the ballot measure, but vote for a mayor who can hit the ground running, and vote for City Council members that will support the mayor in enforcing and implementing the ballot measure year to year

CAVANAUGH: Did you calculate that? That if this is on the ballot measure, then everybody who supports it is going to come out and vote for me as mayor?

DEMAIO: No, the only calculation I've been make suggest how do we fix the financial problems of the city. Pursuing this ballot measure is obviously the very first downpayment on implementing my financial recovery plan, but it will take additional changes like managed competition, rethinking city service, embracing technology, trimming laborer contracts. All those other changes are dependent upon having a mayor and council that can implement real reform on behalf of taxpayerers. That's why I'm pursuing the ballot measure and running for mayor and supporting an entire slate of council candidates who have agreed to a lot of the ideas contained in my financial plan, the roadmap to recovery.

CAVANAUGH: What's next in the campaign for this measure?

DEMAIO: We continue to work hard to raise the resources necessary to get the message out, to educate San Diego voters as to how important this measure is. We expect the laborer unions will spend just an extraordinary amount of money. Money is going to pour in from national and state laborer interests.

CAVANAUGH: Won't money also pour in from national and state antilaborer interests?

DEMAIO: Well, we are going to be outspent in this campaign. We basically know that's going to be the case. It's the same challenge we had with Proposition D last year. The unions outspent us almost 2 and 1/2 to 1. And yet, we won 2 to 1, city-wide. The campaign is not going to be won on the pacis of money. It will be won on thebasis of the arguments, the compelling arguments that we need pension reform and have to move toward a defined contribution system and caps on existing pensions

CAVANAUGH: There were a couple of people who want to get on and talk about this, but this time around, we're just talking with councilman Carl DeMaio about some general aspects of the ballot that the pension reform ballot measure which was just approved, the signatures were verified by the county registrar of voters. We are going to have this topic on often, often, again and again between now and June of 2012. I want to thank our listeners. I've been speaking with San Diego City Council man, Carl DeMaio. Thank you very much.

DEMAIO: Thank you, Maureen.