Fact Check: $1 Billion Saved

Fact Check: $1 Billion Saved

Photo by Jamie Scott Lytle

Mayor Bob Filner

Image: Mostly TrueStatement: “We’ve had some remarkable successes in the past seven months, saving taxpayers tens of millions of dollars for leasing city office space, reducing the city’s unfunded employee pension liability by nearly $1 billion as a result of the five-year freeze on pensionable pay that I negotiated with city unions, removing automobiles from the magnificent Plaza de Panama so it can be enjoyed by pedestrians, expanding the relationship and cooperation with our neighbors across the border and so much more,” Mayor Bob Filner wrote in a July 15 op-ed in U-T San Diego.

Determination: Mostly True

Analysis: Mayor Bob Filner continues to dig in despite mounting calls for his resignation.

The mayor explained why he’s not planning to step down in a U-T San Diego op-ed. He listed a handful of successes, including a claim that five-year labor deals helped the city reduced its “unfunded employee pension liability” by nearly $1 billion.

This statement is worth vetting in the aftermath of a failed pension board vote Filner and other city officials weren’t expecting.

This spring, city officials secured five-year labor deals that included pensionable pay freezes for city staffers. The five-year agreements were significant because the city’s pension system generally assumes 3.5 percent pay increases for city staffers each year. Longer-term labor deals allow the system’s number-crunchers to change their assumptions.

They projected the city could shave $25.2 million from its pension bill this year if the pension board agreed to reassess.

Then, a vote to recalculate the city’s bill didn’t garner enough support, forcing officials to cope with a hole in the city’s budget.

In his op-ed, Filner suggested the city saved that money regardless of the pension board vote.

Before we further delve into this claim, let’s review a little history.

Last June, city voters approved a pension reform initiative known as Proposition B that supporters said would save the city about $1 billion in pension costs over 30 years.

The measure switched all new city staffers, excluding police, to 401(k) plans rather than pensions but saved the most cash by including a five-year freeze on the portion of staffers’ pay that contributes to their pensions, otherwise known as pensionable pay.

An analysis by the pension board’s numbers-cruncher found that pay freeze – which ultimately required the approval of the city’s unions – would save the city about $963 million over 30 years.

On the campaign trail, Filner opposed Prop. B but said he’d implement it according to voters’ wishes. His administration later helped secure those five-year deals with pensionable pay freezes.

But then the pension board didn’t approve the recalculated bill, meaning the city won’t save on its pension bill this year.

Mark Hovey, CEO of the city’s pension system, said the board’s decision won’t significantly affect the city’s savings.

“The board’s decision just delayed the recognition of the savings by one year,” he said.

He emphasized that any savings will come over the long haul.

“The (city’s pension burden) gets reduced a little bit over time but it doesn’t automatically go from $2 billion to $1 billion because you struck a deal,” Hovey said.

Hovey is referring to the city’s unfunded actuarial liability, or the total amount it owes the pension system. It’s currently about $2.2 billion.

But the city’s savings largely come from a year-by-year reduction in the city’s pension bills, which are expected to add up to nearly $1 billion over 30 years.

The mayor said he reduced the city’s “unfunded employee pension liability” by nearly $1 billion thanks to the five-year labor deals.

What he didn’t mention is that the savings are expected to come over the next 30 years, or that they also rely partly on the City Council, which could make future changes to the city’s labor deals that affect its overall pension outlook.

We dub a statement “mostly true” when it is accurate but missing an important nuance.

This ruling fits because Filner didn’t make it clear that the savings will come over time, mostly as a result of reduced annual pension bills.

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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Lisa Halverstadt

Lisa Halverstadt

Lisa Halverstadt is a reporter at Voice of San Diego. Know of something she should check out? You can contact her directly at lisa@vosd.org or 619.325.0528.

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