The battle over retirement benefits continues at San Diego City Hall. The latest wrinkle forced the city's pension board to hold public hearings with angry and fearful retirees. Till now, the board has stood firm in support of all benefits as vested and therefore impossible to roll back. The courts have supported them. But the so-called "purchase of service credits" are costing city taxpayers nearly $150 million. KPBS reporter Alison St John has more.
Purchase of Service Credits is a fancy title for buying time. It takes 10 years to qualify for a pension at the city, but instead of serving time, you can buy years as if you worked them.
The trouble with the program is that it now turns out the resulting pension benefits are worth $146 million more than employees paid . According to the current pension board's attorney Harvey Liederman, the board back in 2003 was well aware of the deficit that was building up.
Liederman: The administrator was telling the board about the widening gap between the cost of the service credit and the price being paid. The actuary was telling the board about the level of subsidy in the program at this point.
The pension board didn't do anything about this widening gap until late 2003, by which time thousands of years had been bought.
Councilwoman Donna Frye, who bought years and tried unsuccessfully to give them back when she learned the truth, spoke to several hundred employees and retirees who gathered at last months public hearing.
Frye: I also purchased service credits. I don't believe it is proper for me or anyone to receive any benefit that has not been fully funded and I hope others will feel the same.
Frye appealed to the city retirees to sacrifice the portion of their benefits not covered by their original payment.
But retiree Richard Wilken said retirees aren't about to give up benefits they have planned their retirement around .
Wilken: There is no way we can go back and make ourselves whole. We can’t un-retire, we can’t negotiate for higher salary, we can’t do that, there is no way you could return us to our position if you were to change the rules of the game after the fact.
And labor attorney Ann Smith, who fought tooth and nail to defeat the city attorney's effort to roll back pension benefits, told the pension board the whole issue is moot.
Smith: It's an academic discussion because you already won, the city already lost. Judge Barton has already written you can not undo. The city lost this issue.
City Attorney Mike Aguirre lost his case before Judge Jeffrey Barton, in which he sought to roll back $600 million in pension benefits. At this point Aguirre is not talking about launching another lawsuit. But he argues this $150 million loss was the result of hundreds of employees rushing to buy years, after they learned it was a good deal and before the pension board acted to raise the price.
Aguirre: There was an underground system between employees that this was a fabulous deal to jump in on, and its disappointing to say the employees took advantage of that, and forgot that they have a duty to the people of this city not to use their inside information to rig the system.
Employees fight back, saying they are being blamed for the decisions of those on the board, some of whom benefited from the program. City engineer Jack Canning says he spent $45,000 of his life savings on buying time to qualify for a better pension -- but he's not the one who came up with the idea.
Canning: Guess who came up with the purchase of service idea who really benefits. It is anyone who cannot obtain 10 years of service by working for the city -- and I'm not talking about employees, I’m talking about elected officials who, due to term limits, can only sever eight years. Blaming city employees for what elected officials have dreamed up is over.
Amidst all the pointing fingers, Thomas Hebrank, president of the current pension board, admits the problem is the result of a lack of action by the previous board. But he's not revealing what the current board might do.
Hebrank: There has been a wrong that has occurred there is $146 million shortfall. We need to see what we can do to address that it has to be decided still .
The board will hold another public hearing this month. So far there is little evidence to suggest the board will be forced to do anything other than what it is doing already -- requiring the city taxpayers to foot the bill.
Alison St John, KPBS News.
