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City Council Sides With Unions, Backs Effort To Strike Prop B From Charter

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The San Diego City Council voted 6-3 in closed session Monday to join a coalition of four local labor unions in their effort to strip 2012's Proposition B pension reform initiative from the city charter.

Speaker 1: 00:00 San Diego City Council voted Monday to stop fighting a legal battle to preserve proposition be an initiative that changed the way the city paid its employees when they retired at stake is potentially millions of dollars in public money. This week's vote shows a majority of the city council siding with the labor unions who never liked switching from guaranteed pensions to 401k type retirement plans. Joining me to discuss this now is KPBS metro reporter and Ruben. Thanks for being here and yeah, my pleasure. What was the reason that the city decided to switch initially from the guaranteed pension to a 401k type plan? 401K style plan, which is a defined contribution plan, is kind of like a savings account. So you contribute to it, your employer contributes and you earn money through the growth and the stock market. And then when you retire, that's the money that you have to live off of for the rest of your life and a pension system or a defined benefit plan.

Speaker 1: 00:51 Um, you're also putting in money Europe, employers also putting in money, but when you retire your guaranteed income under the law until your death. So the risk of losing benefits, uh, because of a market crash or recession or whatever, it falls on the employee under the 401k system. Um, the risk falls on the city and taxpayers under our pension system. And public employees often make less than they would, you know, in, in income than if they were working in the private sector. Pensions are often less generous than a 401k retirement benefits. Not always, but sometimes. And so public employee unions often argue that the security, that a pension plan, uh, provides in retirement is one of the few, uh, things that, that cities have to attract the best kind of workers. So the proponents of prop, he had essentially argued that the entire idea of a pension whereby the city and taxpayers are responsible for pain. These retirement benefits up until an employee's death is unsustainable. I spoke to Scott Sherman who voted against the city council's action yesterday after the meeting. And here's what he told me,

Speaker 2: 01:54 they're going to try and force the city to go back to defined pensions instead of 401k plans, which is what took us to the bank that, you know, to the brink of bankruptcy here, not more than eight or nine years ago, but you know how quickly people forget.

Speaker 1: 02:09 So Andrew, you know, the market is upright now and so four one ks are doing relatively well. Is it true to say that this would be a much bigger issue to the general public if the markets were down? Possibly if we were in a recession or if the stock market suddenly crashed, uh, employees in that, those 401k style plans would potentially be losing a lot of money. And if they are close to retirement, that would be a really big worry for them. Um, it would also mean if there were more employees in the pension system that the city would be on the hook for paying out more money. So, uh, you know, ultimately the difference between a four oneK or a pension is who's taking on the risk. And, uh, who is, you know, granted that security. So the last time there was a crisis, you know, libraries would cuddle up to public services were cut as a result of the city trying to make up its pension fund.

Speaker 1: 02:56 Um, now this debate of ahead of fund retirement's for city workers is something that cities all over the state are struggling with. How many other California cities have switched to 401k plans instead of guaranteed pensions? Zero. And that was part of the, uh, argument it during the property campaign that if the city of San Diego, uh, makes this bold step into the new future and decides we're no longer going to be, you know, maintaining this unsustainable a system of pensions, other cities will follow suit. What happened instead is that the city made its change and other cities kept, uh, you know, offering pensions and, uh, the city has then developed a very difficult problem of recruiting and retaining the most talented workers. Someone might come to work for the city of San Diego, say as a, as an engineer or a, you know, a finance officer or whatever.

Speaker 1: 03:43 And to gain a few years of experience and then move on to La Mesa or the county of San Diego and, uh, get a much more favorable retirement plan there. So the city is basically back at square one. How much is it spent in legal costs over this whole battles to date? Because the city lost this case all the way up at the Supreme Court. It has been ordered to pay the legal fees and the expenses of the unions. Uh, they put that cost at about one point $3 million as of March 31st, although that's a somewhat incomplete figure. Um, so the costs are likely higher and they will continue to grow as this legal battle continues. Now the council voted yesterday to support a quote Warren tow process. What does that mean? Yeah, it's a relatively rare process, but it's the process by which the courts will be able to or would potentially invalidate proposition B. So the unions, uh, the first step is the unions have to go to the attorney general, the State Attorney General, and ask for permission to sue the city of San Diego on behalf of the state of California.

Speaker 1: 04:44 A little bit of background. So San Diego is what's called the charter city. We have a city charter and that allows it a little bit more autonomy in some areas, but they have to maintain a charter that complies with the superior state law. Um, and so given that the city broke state law with, uh, enacting this charter amendment, the unions will attempt to act as the lawyers for the state and say that the state has to step in here and order the city to correct its mistake. Uh, it abused. It's privileged as a charter city and the charter has to be corrected. So Andrew, do you expect any legal challenges to this lawsuit that would lead to the removal of the pension roof? We'll measure from the city charter. I think it's likely that the proponents of prop B, we'll, uh, we'll agree that this lawsuit, um, you know, that's quo would run to proceeding.

Speaker 1: 05:29 Should continue because that's where they're going to make the argument that property should be preserved. Um, but what would probably happen is that because the city essentially decided yesterday, they are going to be arguing, although they're the defendants in this case, where they would be the defendants in this case, there'll be arguing the same thing as the plaintiffs, the state of California, and this, the, the unions. So a, the proponents of prop B could attempt to intervene in the lawsuit and basically say, you know, we, we want our due process here and we want to act as, as a third party of interest. Um, and we should argue in favor of property. Thanks for bringing us up to date, Andrew. Yeah. Thank you, Alison. That's Kpbs Metro reporter Andrew Bowen.

Speaker 3: 06:07 [inaudible].

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Maureen Cavanaugh and Jade Hindmon host KPBS Midday Edition, a daily radio news magazine keeping San Diego in the know on everything from politics to the arts.