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San Diego tackles municipal pensions

A mayoral candidate is pushing to put an overhaul measure on the June ballot. But unions are trying to block the effort. Elected officials across the U.S. are watching.

February 19, 2012|By Tony Perry, Los Angeles Times

Reporting from San Diego — The numbers released by the city's leading pension hawk were meant to shock: a retired assistant city attorney with an annual pension of $307,758; a chief librarian receiving $234,091; an 80% increase in the last two years in the number of retired city employees with pensions of more than $100,000.

"At a time when roads are falling apart, services are being cut and private-sector taxpayers are facing difficult economic realities, these pension payouts are simply offensive," Councilman Carl DeMaio, a candidate for mayor, said at a news conference last week.

At roughly the same time, city labor unions were in court asking a judge to block the city from putting a pension overhaul measure favored by DeMaio on the June ballot. A hearing is set for Tuesday.

The measure would end guaranteed pensions for newly hired employees and instead provide 401(k) accounts for everyone except police. The measure would also freeze salaries at which pensions are calculated for five years.

The unions — backed by the state's Public Employee Relations Board — say the mayor and council committed an unfair labor practice by refusing to negotiate over the 401(k) issue and instead pretended the measure was a "citizens initiative" when it was actually orchestrated by DeMaio and Mayor Jerry Sanders.

Municipal unions and elected officials across the country are expected to keep a close eye on the matter.

"We've been the guinea pig on this thing," Sanders said last week at the National Press Club in Washington, D.C.

Sanders said he expected labor unions to pour money into the campaign to defeat the pension measure out of fear that other cities would follow suit. Governing magazine says that although San Diego "has not quite gotten its fiscal ship in order," it is ahead of cities such as San Jose and Los Angeles that were slower to tackle the pension and retiree health benefit issues.

A decade ago, the San Diego City Council gained notoriety for cutting deals with city unions to boost pensions in exchange for reducing the amount the city allocated to the pension fund.

San Diego political leaders had expected a rising stock market to make up the difference, but when the tech- and housing-bubbles burst the city was left with a pension and retiree healthcare shortfall that was in the billions of dollars.

The result has been years of political turmoil, service cutbacks, layoffs, salary freezes, salary reductions and speculation over whether the city would file for bankruptcy.

While San Diego once seemed virtually alone in its woes, local and state governments nationwide are now struggling with the same problem: pensions promised to public employees when economic times were good seem unsustainable and unfair to taxpayers who have seen pensions disappear in the private economy.

Sanders, a Republican and former police chief, was elected in 2005 to replace Mayor Dick Murphy, who resigned amid criticism of his handling of the pension shortfall. Sanders was reelected in 2008 and is now termed out.

Pension payments remain a top issue in the campaign to elect a successor to Sanders. All three leading Republican candidates — DeMaio, Assemblyman Nathan Fletcher and Dist. Atty. Bonnie Dumanis — endorsed the pension measure.

U.S. Rep. Bob Filner, the leading Democratic candidate, opposes it.

The measure, Filner said, "is not only unfair but immoral." He proposes an alternative: capping management pensions and floating pension bonds to stretch out the city's payments.

Much of the debate over pensions involves conflicting assessments of the depth of the shortfall and how the changes implemented during Sanders' tenure, including a change in retiree healthcare, will work.

April Boling, a certified public accountant in San Diego and leading advocate of overhauling the pension system, is cautious in her assessment.

The city, she said, has not made "significant strides in actually whittling down its unfunded pension liability" but at least has stopped making the problem worse and is using more realistic financial numbers than the San Diego County government or the state retirement system.

"San Diego is ahead of other jurisdictions in getting this fixed," she said.

City employees feel battered by the continuing controversy, said Joan Raymond, a garbage truck driver and president of Local 127 of the American Federation of State, County and Municipal Employees.

"Morale is terrible," she said. "Our employees have been giving and giving in terms of pay and benefits, and they feel it is never ending."

While Filner proposed floating bonds, he is not ready to suggest a tax increase. That idea, he said, is "dead on arrival" in San Diego, where aversion to taxation is a kind of civic religion.

tony.perry@latimes.com

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