Bob Filner Not Doing San Diego Any Favors by Not Releasing Pension Details
Debate at Joyce Beers Community Center in Hillcrest between Todd Gloria and Lani Lutar sharpens the contrast between Prop B pension reform proponents and opponents, the real motivations behind the June, 2012 ballot initiative, and the real costs to the city if it passes.
Last week the OB Rag sat down with Congressman and San Diego mayoral candidate Bob Filner, where he discussed in detail his version of a plan to fix the city’s pension system. During the interview he laid out the framework for what he says would be an effective and—most importantly–legal way to save the city money and bring down the debt problem generated from the underfunding of city worker pensions by former mayors Susan Golding and Dick Murphy.
Filner’s plan entails capping pensions at just under $100,000, renegotiating a labor contract with city workers for a period of five years with smaller salary increases than are called for in the current contracts, and by refinancing the city’s pension debt at a lower interest rate and for a 30 year term. According to Filner, combine all three steps and you get a savings roughly equivalent to the $963 million over 30 years that Prop B is estimated to save. Refinancing alone, Filner says, would save the city $550 million over the next 10 years.
Prop B, you might recall, is the “Comprehensive Pension Reform” initiative that converts all pensions for new city employees to a defined contribution 401(k) plan and imposes a salary freeze on city employee wages for the next five years.
I know………this is all terribly wonkish stuff. Bear with me…….
Last night, Democrats for Equality hosted a forum at the Joyce Beers Community Center in Hillcrest to talk specifically about Prop B. City Councilman Todd Gloria was there to debate Lani Lutar, the president of the San Diego County Taxpayers Association. I’ll let you guess which side of the argument each was on.
As noted, the talk centered around Prop B, which proponents say will save the city almost $1 billion over the next 30 years, while opponents say it will cost the city $54 million over the next five years. It all gets rather complicated, as this fact check analysis by the Voice of San Diego’s Liam Dillon shows.
Lutar says that Prop B must pass so that the city can not only shift from what is known as a defined benefit plan (pensions) to a defined contribution plan (401(k)), and so that the city can shift the risk from the city to city workers.
Lutar tried gamely to convince the audience that Prop B, whose biggest champion is mayoral candidate Carl DeMaio, was actually good for city workers, and that it created a certainty and stability in the pension system that would be good for the city. Except that it really puts an end to the pension system, and it leaves the futures of city workers subject to the stock market “like everyone else.”
Breaking it down to the basics: According to the City Auditor, Prop B will cost the city $13 million more over the next 30 years, and will result in an additional $54 million in costs for the city for fiscal years 2014-2016 due to a mandated acceleration in payments into the pension plans of older city workers.
Here’s where it gets really interesting and damaging to proponents of Prop B: According to Gloria, the City of San Diego currently has a budget surplus of $16 million. In fact, says Gloria, compared to Los Angeles and San Francisco, San Diego is in great shape financially.
In 2014, San Diego is currently projected to have a $2 million surplus. If Prop B is implemented in full force (no guarantee…..more in a minute) the fiscal impact on the city budget in 2014 will be a cost of $27 million, Gloria says. Combine that with the $5 million scheduled to be put into the system, and we have San Diego going from a $2 million surplus to a $20 million deficit.
“I just don’t understand why people are complaining when we save the city nearly $1 billion over 30 years. That’s money that goes back into the city’s coffers for road repairs and other city services,” said Lutar.
Perhaps it’s because that’s $54 million that can be put to work for San Diego in the near term without digging a massive hole in the budget.
Oh…….and there is no guarantee that Prop B will be implemented as intended. As Lutar herself admitted, the law will only allow the five year pay freeze to be the opening salvo in negotiations with the labor unions, and it can be overridden by a 2/3 vote of the City Council. So while DeMaio is “supporting certain candidates for the City Council” that will make sure the city doesn’t vote to override the pay freeze, it’s highly unlikely that after going without pay increases for the last five years that the unions will agree to an additional five years of no wage increases. That would be 10 years for city workers’ wages remaining stagnant.
Oh, yeah……..forgot to mention: City workers in 2009 already agreed to freeze their wages and give back certain pension and health benefits in order to help the city get its financial house in order. And it worked. The city currently has an A+ credit rating from Standard & Poor’s after having its credit suspended back in 2004.
But, Lutar says, under Prop B city employees are still eligible for annual pay bonuses. The city can still reward workers bonuses in lieu of pay raises should it see fit to do so during the pay freeze.
Prop B “is nothing but an effort to attack city workers and make their lives absolutely miserable,” Gloria said. “Carl DeMaio will not give city workers bonuses. What he wants is to make their lives so miserable that they eventually leave, and when enough of them leave, he can go and contract those services out to private corporations.” It’s all a part of DeMaio’s push to make San Diego the “Wisconsin of the West,” he said.
San Diego, Gloria says, has a pension debt problem and not a budget problem.
Which is where Bob Filner and his plan comes in. None of the talk on the night dealt with how to effectively deal with that pension debt that was incurred by the city councils led by Mayors Golding and Murphy. Filner has a very reasonable idea for how to do it: Refinance $1 billion of it for a 30 year period. I’m no expert, but it sounds like it could work. Lower interest rate combined with a longer term spells significantly lower payments than the city is putting in now.
Filner shared with us the outlines of his pension proposal, but he hasn’t submitted it to be combed over by the numbers crunchers to see just exactly what it would do and how much it could save. There are no official numbers.
So when I asked Todd Gloria why they didn’t discuss the refinancing aspect, he said that until there was a real nitty gritty analysis to look at they can’t present it as a legitimate alternative.
As it stands, San Diego voters aren’t really being offered a choice. City officials have done a lot of work to correct some of what was broken, but more needs to be done to reduce the escalating payments into the pension system over the next decade.
Bob Filner has what appears to be a truly viable alternative to Prop B, which is simply bad plan for San Diego and San Diego city workers. But by his campaign not getting off its duff and presenting some actual numbers they are doing this city a real disservice. By not presenting and articulating a real alternative to Prop B that voters can parse through themselves, voters are going to feel compelled to vote in favor of a bad deal that’s designed to make civil service so unpalatable that the Carl DeMaio’s of San Diego will once and for all be able to fulfill their dreams of privatizing the entire city.