Photo by Sam Hodgson
Statement: “The referendum (Proposition B) on the ballot costs almost $100 million over the next few years to implement,” mayoral candidate Bob Filner wrote in an editorial published April 28 by U-T San Diego.
Determination: Mostly True
Analysis: One of the most prominent issues separating Filner from his election rivals is Proposition B, the pension initiative. Filner opposes it. His three rivals support it.
The initiative aims to replace pensions with 401(k)-style plans for most new city workers and pressure the city to approve a five-year pay freeze. The city’s financial analysis shows both steps would save nearly $1 billion over the next three decades.
But Filner calls the initiative a fraud. All of the possible savings would come from the pay freeze, which isn’t guaranteed to happen. Even if voters pass the initiative, the City Council would still determine how employees are paid.
At candidate debates and during media interviews, Filner often claims the initiative itself saves the city nothing. We’ve previously rated that True because the savings rely on the City Council’s future actions. They wouldn’t automatically happen.
In some cases though, Filner takes the claim a step further and argues the initiative would actually increase costs instead of shrinking them.
“It doesn’t do one thing for the existing pension system,” Filner said recently on Fox5′s morning show. “It sets up a new one — costs $100 million by the way — and saves no money for the general fund.”
In an editorial published by U-T San Diego, Filner cited a similar figure and added a time reference. He wrote the initiative “costs almost $100 million over the next few years to implement.”
That’s also possibly true, according to the city’s financial analysis. If the City Council doesn’t approve the pay freeze, the analysis estimates costs would rise by $101 million over the next eight years. However, if the council approves the freeze, the figure drops to $54 million over the first three years.
The graphic below helps explain these two scenarios. The orange line shows how much the city currently expects to pay into the pension system. The purple line shows how much the city would pay if voters pass the initiative and the council freezes pay. The blue line shows how much the city would pay if voters pass the initiative but the council doesn’t freeze pay.
With the pay freeze, the initiative is expected to increase costs in the short-term and reduce costs by nearly $1 billion over 30 years. Without the freeze, the initiative is expected to increase costs in both the short-term and the long-term ($13.5 million over 30 years).
In either scenario, costs are projected to climb for the first few years because the city would need to pay off roughly $2.1 billion in pension debt at a faster rate. At least initially, that could mean less money to spread around for basic city services like police, parks and libraries.
Filner’s claim is supported by one scenario in the city’s financial analysis. The initiative would create the 401(k) system and a starting point for labor negotiations on the pay freeze. Voters can’t legally freeze pay, and the City Council could still boost pay with a two-thirds vote.
We’ve rated Filner’s statement Mostly True because it assumes the council would not freeze pay in the next five years, which is at the very least an important caveat to consider.
If you disagree with our determination or analysis, please express your thoughts in the comments section of this blog post. Explain your reasoning.
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