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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19 comments
Augmented Ballot
Augmented Ballot

It bears repeating, the $1B in projected savings is based on a couple silly assumptions: 1) that pensionable pay will stay permanently depressed (vs the assumed 3.5% annual increase baseline) after the 5-yr freeze ends in the absence of any mechanism or even suggestion that it do so; 2) that the baseline the savings are measured against is realistic: that is, that PP would really be increasing at a rate of 3.5%/yr absent Prop B. Hadn't seen anything like that in decades prior. So, "mostly true"? Relative to the story we've been telling ourselves, sure. But the actual savings versus where we'd be after 30yrs otherwise? Huckster, through and through.

Augmented Ballot
Augmented Ballot subscriber

It bears repeating, the $1B in projected savings is based on a couple silly assumptions: 1) that pensionable pay will stay permanently depressed (vs the assumed 3.5% annual increase baseline) after the 5-yr freeze ends in the absence of any mechanism or even suggestion that it do so; 2) that the baseline the savings are measured against is realistic: that is, that PP would really be increasing at a rate of 3.5%/yr absent Prop B. Hadn't seen anything like that in decades prior. So, "mostly true"? Relative to the story we've been telling ourselves, sure. But the actual savings versus where we'd be after 30yrs otherwise? Huckster, through and through.

Don Wood
Don Wood

Thanks for getting this fact check mostly right.

Don Wood
Don Wood subscriber

Thanks for getting this fact check mostly right.

Jim Jones
Jim Jones

Another "fact check" where the facts don't matter. Have unfunded employee pension liability really been reduced by nearly $1 billion? No Can VOSD find a logical thinker without bias to do this segment?

Jim Jones
Jim Jones subscriber

Another "fact check" where the facts don't matter. Have unfunded employee pension liability really been reduced by nearly $1 billion? No Can VOSD find a logical thinker without bias to do this segment?

Witness
Witness

How does one reconcile the two Bob Filner's (Policy Bob versus Personal Bob)? Policy Bob Filner's actions have been in the public interest. Some of Personal Bob's actions (by his own admission) have been wrong and inexcusable. Policy Bob sides with women's interests, while some of Personal Bob's actions have been contradictory. Is it possible to replace Policy Bob without reverting to the same status-quo money dominated corruption that is used to steamrolling ordinary citizens? Can personal Bob reform himself with the help and insistence of others? We don't know - but we all have vested interests in the answers. There are too many undiscussed big picture issues that weigh in the balance. Thanks to Bob's courageous former allies and friends, Bob Filner has been called out and hence, he embarrassed himself. Therein lies the opportunity for someone that is strong and genuine, with the help of others to make personal change. I respect those that have called out Personal Bob for his inappropriate behavior and their requests for his resignation may have been the only way that Personal Bob could be brought to understand the serious nature of his actions and the absolute need for personal change. I also value someone that understands big picture policy and is determined to complete the work that has been entrusted. Bob Filner is the one who knows whether we should give up on Bob Filner. As long as Policy Bob is willing to work on behalf of the public interest (including women's interests) and have zero tolerance for any inappropriate behavior from Personal Bob, I will respect the voters decision that elected him on policy and Bob Filner's decision about his ability to change, his fitness for office and ability to further the public interest. I am a believer in redemption. If Bob Filner is able to achieve it and demonstrate it personally and in policy, i will renew my respect for him. I already have some respect for the Bob that is willing to try rather than concede by resignation.

Witness
Witness

How does one reconcile the two Bob Filner's (Policy Bob versus Personal Bob)? Policy Bob Filner's actions have been in the public interest. Some of Personal Bob's actions (by his own admission) have been wrong and inexcusable. Policy Bob sides with women's interests, while some of Personal Bob's actions have been contradictory. Is it possible to replace Policy Bob without reverting to the same status-quo money dominated corruption that is used to steamrolling ordinary citizens? Can personal Bob reform himself with the help and insistence of others? We don't know - but we all have vested interests in the answers. There are too many undiscussed big picture issues that weigh in the balance. Thanks to Bob's courageous former allies and friends, Bob Filner has been called out and hence, he embarrassed himself. Therein lies the opportunity for someone that is strong and genuine, with the help of others to make personal change. I respect those that have called out Personal Bob for his inappropriate behavior and their requests for his resignation may have been the only way that Personal Bob could be brought to understand the serious nature of his actions and the absolute need for personal change. I also value someone that understands big picture policy and is determined to complete the work that has been entrusted. Bob Filner is the one who knows whether we should give up on Bob Filner. As long as Policy Bob is willing to work on behalf of the public interest (including women's interests) and have zero tolerance for any inappropriate behavior from Personal Bob, I will respect the voters decision that elected him on policy and Bob Filner's decision about his ability to change, his fitness for office and ability to further the public interest. I am a believer in redemption. If Bob Filner is able to achieve it and demonstrate it personally and in policy, i will renew my respect for him. I already have some respect for the Bob that is willing to try rather than concede by resignation.

David Crossley
David Crossley

So the $25 mil in savings for this year would have been achieved by underfunding the annual pension payment by the city to the pension plan by the same amount. Nice to see that the city still hasn't learned their lesson.

David Crossley
David Crossley subscriber

So the $25 mil in savings for this year would have been achieved by underfunding the annual pension payment by the city to the pension plan by the same amount. Nice to see that the city still hasn't learned their lesson.

Witness
Witness

How does one reconcile the two Bob Filner's (Policy Bob versus Personal Bob)? Policy Bob Filner's actions have been in the public interest. Some of Personal Bob's actions (by his own admission) have been wrong and inexcusable. Policy Bob sides with women's interests, while some of Personal Bob's actions have been contradictory. Is it possible to replace Policy Bob without reverting to the same status-quo money dominated corruption that is used to steamrolling ordinary citizens? Can personal Bob reform himself with the help and insistence of others? We don't know - but we all have vested interests in the answers. There are too many undiscussed big picture issues that weigh in the balance. Thanks to Bob's courageous former allies and friends, Bob Filner has been called out and hence, he embarrassed himself. Therein lies the opportunity for someone that is strong and genuine, with the help of others to make personal change. I respect those that have called out Personal Bob for his inappropriate behavior and their requests for his resignation may have been the only way that Personal Bob could be brought to understand the serious nature of his actions and the absolute need for personal change. I also value someone that understands big picture policy and is determined to complete the work that has been entrusted. Bob Filner is the one who knows whether we should give up on Bob Filner. As long as Policy Bob is willing to work on behalf of the public interest (including women's interests) and have zero tolerance for any inappropriate behavior from Personal Bob, I will respect the voters decision that elected him on policy and Bob Filner's decision about his ability to change, his fitness for office and ability to further the public interest. I am a believer in redemption. If Bob Filner is able to achieve it and demonstrate it personally and in policy, i will renew my respect for him. I already have some respect for the Bob that is willing to try rather than concede by resignation.

Bill Sheffler
Bill Sheffler

The city through future labor negotiations can wipe out almost all of those future savings. The savings only emerge in a concrete way when an employee retires and their "pensionable" pay is less than it would have been without the freeze. In other words, the freeze is temporary and savings are dependent on the future actions of the city. Prop B did not (and could not) require the city to freeze pensionable pay.

Bill Sheffler
Bill Sheffler subscribermember

The city through future labor negotiations can wipe out almost all of those future savings. The savings only emerge in a concrete way when an employee retires and their "pensionable" pay is less than it would have been without the freeze. In other words, the freeze is temporary and savings are dependent on the future actions of the city. Prop B did not (and could not) require the city to freeze pensionable pay.

Chris Brewster
Chris Brewster

As Mr. Sheffler and Augmented Ballot state, this fact check is based on an assumption that the prognostication by the pension board’s actuary in analyzing the impacts of Proposition B will prove to be entirely accurate 30 years from now. As I have written in the past, that prognostication was based on an absurd assumption that after this five year freeze, pay will continue to be depressed by an amount equivalent to that experienced during the freeze period for the following 25 years. This fact check then is supposition based upon an uncertain projection. Hardly the basis of fact. As for Mr. Filner, he was speaking accurately with respect to the accepted wisdom of the issue and can't really be blamed for following through on the assumptions within Proposition B. Those assumptions however, are absurd in my view.Letter: Prop. B Is 'A Fiscal Bomb'http://voiceofsandiego.org/2012/03/27/letter-prop-b-is-a-fiscal-bomb/It's not surprising to see a majority of likely voters saying they will vote for the pension reform initiative, but the recent independent analysis of its likely costs gives reason for serious concern. First, the change to a 401(k) plan was found to ...

Augmented Ballot
Augmented Ballot

In your own words, then, the $1B in savings promised in selling Prop B was a lot of wishcasting. Now you tell us?

Mark Giffin
Mark Giffin

I hope you continue to post on this subject Bill. The insight is valuable to the discussion. Passing prop B was the best gift the voters could of given future generations IMHO.

Chris Brewster
Chris Brewster subscribermember

As Mr. Sheffler and Augmented Ballot state, this fact check is based on an assumption that the prognostication by the pension board’s actuary in analyzing the impacts of Proposition B will prove to be entirely accurate 30 years from now. As I have written in the past, that prognostication was based on an absurd assumption that after this five year freeze, pay will continue to be depressed by an amount equivalent to that experienced during the freeze period for the following 25 years. This fact check then is supposition based upon an uncertain projection. Hardly the basis of fact. As for Mr. Filner, he was speaking accurately with respect to the accepted wisdom of the issue and can't really be blamed for following through on the assumptions within Proposition B. Those assumptions however, are absurd in my view.Letter: Prop. B Is 'A Fiscal Bomb'http://voiceofsandiego.org/2012/03/27/letter-prop-b-is-a-fiscal-bomb/It's not surprising to see a majority of likely voters saying they will vote for the pension reform initiative, but the recent independent analysis of its likely costs gives reason for serious concern. First, the change to a 401(k) plan was found to ...

Augmented Ballot
Augmented Ballot subscriber

In your own words, then, the $1B in savings promised in selling Prop B was a lot of wishcasting. Now you tell us?

Mark Giffin
Mark Giffin subscribermember

I hope you continue to post on this subject Bill. The insight is valuable to the discussion. Passing prop B was the best gift the voters could of given future generations IMHO.