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Budget Analyst Report Sparks More Debate On Pension Reform

Pension Reform Analysis
We hear from both sides of pension reform and break down the city's analysis.
GUESTLorena 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.
Analysis of Pension Reform Sparks Debate
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.

Pension Reform Analysis
City Clerk's fiscal analysis of pension reform initiative.
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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.