San Diego setting an example on pension reform

The city of San Diego has long been the poster child for pension abuse, but now it has a chance to become the statewide poster child for pension reform thanks to a ballot measure that top officials are circulating. San Diego’s efforts should be heartening to other California cities, including San Francisco, which are facing debt and curtailed public services because of pension costs.

As attorneys Robin Bergen and Shawn Chen succinctly explain the past San Diego mess, “In 2004, the SEC investigated San Diego’s employee pension fund and discovered that city officials had allegedly used creative accounting to make it appear as if the pension fund was in better shape than was truly the case.” The even bigger scandal was revealed in a report last year, showing that the city’s top 10 pension recipients will receive nearly $62 million in pensions in the next 25 years.

But now city officials are championing a surprisingly far-reaching measure. It would put new employees on a 401(k)-style plan and it includes firefighters and lifeguards in that new formula. Firefighters are among the nation’s biggest pension recipients and abusers but usually get a pass. Unfortunately, police were not included in the new program — no doubt a savvy political move, but one that leaves a big problem unfixed.

Furthermore, the proposal ends some of the worst pension-spiking gimmicks by basing pensions on base pay rather than on the inflated formulas that public employees use to enhance their lifetime pension benefits. The initiative would cap a worker’s pensionable pay — allowing employees to gain pay increases while limiting what those increases will mean for pension payouts.

The city and employees would split contributions, thus ending the absurd situation whereby taxpayers pay the employee’s contribution as well as the employers’ contribution. The initiative would strip pensions from Mafia cops and others convicted of job-related felonies. Death and disability benefits — so thoroughly abused, as majorities of public safety workers discover disabilities almost exactly a year from retirement (irritable bowel syndrome, knee pains, back aches, etc.) — would be handled as an insurance matter rather than as an entitlement. And, per the Union-Tribune report, the charter would be changed so city workers would not have to vote on benefit reductions.

This is serious, sensible reform, which advocates believe will save $363 million over five years. That’s significant, given that the Union Tribune explains, “The city’s $2.1 billion shortfall in money needed to pay promised pensions requires ever-increasing annual payments that leave officials with little room to maneuver financially.” Obviously, something has to be done to save the city services being plundered to enrich a small class of workers.

Expect the emotional ads (firefighters rescuing people, etc.), but let’s hope San Diego voters remember that they can’t afford such generosity any longer. Fortunately, the two sides of reformers were able to agree on a compromise so there won’t be competing initiatives. San Diego could revive its reputation as a well-managed, conservative-minded city if this gets on the ballot and approved by voters. And it can serve as encouragement for San Francisco, which faces similar pension-related problems and where voters are likely to get another chance to vote on a more modest pension-reform measure sponsored by Public Defender Jeff Adachi.

Whether in San Diego or San Francisco, the pension reform movement — driven by huge debts and absurd abuses — is just getting started.

Nothing contained in this blog is to be construed as necessarily reflecting the views of the Pacific Research Institute or as an attempt to thwart or aid the passage of any legislation.

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