Alvarez Pushes Alternative to GOP’s Pension Reform

Alvarez Pushes Alternative to GOP’s Pension Reform

Photo by Sam Hodgson

City Councilman David Alvarez

 

After months of talk, someone officially proposed an alternative to a high-profile pension reform initiative that will face city voters in June.

City Councilman David Alvarez’s plan does just about everything the pension initiative does except it doesn’t give new employees 401(k) plans. Instead, Alvarez preserved pensions and replaced the 401(k) portion of the measure with a $99,999 pension cap for new employees.

The switch allows Alvarez to make a significant claim about his measure’s benefits: It will save more money. Changing to a 401(k) system for most new hires will cost the city $94 million in the first six years, the city retirement system estimated last spring. To address those costs, backers of the initiative proposed a five-year salary freeze on city employees. Supporters say the measure will save more than $1 billion over the next three decades.

Alvarez’s plan has all the savings without the costs.

“As I outlined last week at City Council, my proposed ‘Cap & Freeze’ pension reform measure … will achieve significant savings without the millions of dollars it will cost the city to implement a new 401(k) style retirement plan,” Alvarez wrote in a Tuesday memo.

It remains to be seen if Alvarez’s proposal will have any traction. The City Council will have to vote to put the measure on the June ballot by next month. Council President Tony Young’s office didn’t immediately respond to a request for comment.

It’s clear that Alvarez, a Democrat, is attempting to undercut the existing pension initiative. The city’s Republican and business interests developed the initiative and spent more than $1 million to qualify it for the June ballot.

Just about every word in Alvarez’s proposed alternative matches the original initiative, save the part about the 401(k). That means Alvarez’s plan suffers from the same legal question marks and lack of guaranteed savings as the initiative.

Most significantly, the five-year freeze on city employee salaries doesn’t actually freeze pay. That would violate state labor law. Instead, the language sets a voter-mandated opening negotiating position that six council members can change. It’s a crucial distinction. Without the freeze, the plan’s savings disappears.

Alvarez hasn’t been the only one discussing an alternative pension measure. Mayoral candidate Bob Filner, who Alvarez has endorsed, has talked about his own alternative for the last eight months, but hasn’t released anything.

I did a Q&A with Alvarez in December where he discussed his reasons for wanting an alternative to the pension initiative:

Do you believe that there is space for an alternative pension measure on the June ballot?

Absolutely.

What would that look like?

Something that doesn’t cost us millions of dollars to switch over and that doesn’t expose us to potentially more if we must re-enter Social Security. I think there’s been a lot of changes over the last several years. Most of the outrageous things that we saw in the pension have been scaled back, they’ve been rolled back. If you believe that that’s the case and that our benefit now is a level that is reasonable …

You’re talking for new employees?

New employees. I think the new benefits are reasonable. There’s no reason to change those. If the freeze of pay is where all of the savings are in this measure, and I’ve seen the numbers and that’s what they show, then perhaps that’s where we should go and we should look at how we could achieve savings that way.

Would you be leading the charge on that? Obviously, it would be something the council would put on the ballot themselves.

I’m talking to Council President (Tony) Young about that because obviously he has to put it on the agenda or we’ll have to find four people that are willing to. Obviously, if something does come, it will come in the next 60 days.

Liam Dillon is a news reporter for voiceofsandiego.org. He covers San Diego City Hall, the 2012 mayor’s race and big building projects. What should he write about next?

Please contact him directly at liam.dillon@voiceofsandiego.org or 619.550.5663.

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Liam Dillon

Liam Dillon

Liam Dillon is senior reporter and assistant editor for Voice of San Diego. He leads VOSD’s investigations and writes about how regular people interact with local government. What should he write about next? Please contact him directly at liam.dillon@voiceofsandiego.org or 619.550.5663.

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12 comments
Theresa Quiroz
Theresa Quiroz subscriber

Thanks to Council member Alvarez for bringing this forward. It is a much better option for the taxpayers.

Theresa Quiroz
Theresa Quiroz

Thanks to Council member Alvarez for bringing this forward. It is a much better option for the taxpayers.

Tammy Tran
Tammy Tran subscriber

It may be necessary to have an alternative pension measure.

TammyT
TammyT

It may be necessary to have an alternative pension measure.

Bill Sheffler
Bill Sheffler subscribermember

Further, by leaving new hires in the DB plan, it leaves the door open for an MP3 proposal.

WmJSheffler
WmJSheffler

Further, by leaving new hires in the DB plan, it leaves the door open for an MP3 proposal.

Chris Brewster
Chris Brewster subscribermember

City employees tend to stay with their employer over the long term. Having a safe and secure retirement ensures a degree of security for them, but also removes a concern for society that these people might become a burden to others when they can no longer work. If the city and by extension the taxpayers will spend the same amount in benefits on a 401(k) or a pension, I would suggest for these reasons that the pension is by far the better option. All the better if it is less costly.

B Chris Brewster
B Chris Brewster

City employees tend to stay with their employer over the long term. Having a safe and secure retirement ensures a degree of security for them, but also removes a concern for society that these people might become a burden to others when they can no longer work. If the city and by extension the taxpayers will spend the same amount in benefits on a 401(k) or a pension, I would suggest for these reasons that the pension is by far the better option. All the better if it is less costly.

Jim Jones
Jim Jones subscriber

Is anyone in SD really dumb enough for fall for a union backed faux alternative to ending these ridiculous and expensive pensions?

Jim Jones
Jim Jones

Is anyone in SD really dumb enough for fall for a union backed faux alternative to ending these ridiculous and expensive pensions?