Fact Check: Alvarez’s Pension Reform Plan

Fact Check: Alvarez’s Pension Reform Plan

Photo by Sam Hodgson

David Alvarez

Image:Mostly TrueStatement: “I’ve also worked with my colleagues to say yes together. Making sure that we have things like the five-year labor agreement, which by the way was something I presented even before Proposition B as a way to save millions of dollars for our city,” mayoral candidate and Councilman David Alvarez said at a Sept. 20 debate.

Determination: Mostly True

Analysis: City Councilman David Alvarez has less than three years in elected office under his belt so he’s trying to emphasize his big ideas and accomplishments during that relatively short time as he campaigns for mayor.

One of the ideas he’s repeatedly mentioned is his push for five-year labor deals long before former Mayor Bob Filner inked those cost-saving agreements with the city’s unions earlier this year.

At a debate last week, Alvarez claimed he championed the unprecedented labor deals before voters approved Proposition B, a pension reform initiative that drew its most significant savings from five-year pensionable pay freezes for city employees.

Alvarez made a similar comment in a recent U-T San Diego Q-and-A.

“Being able to reach consensus on some very difficult issues — retiree health care, a labor agreement this year, which, by the way, I proposed in January of the year before. That’s what I was proposing, a five-year (pensionable) pay freeze on employees to achieve those savings,” he told the U-T.

Alvarez’s statements merit some vetting because pension reform and the path to five-year labor deals will likely come up throughout the campaign. It’s crucial voters have a clear idea of the role Alvarez, a Democrat with an endorsement from the region’s most powerful labor group, played in process.

Years after San Diego earned its “Enron by the Sea” moniker, city Republicans and business leaders struggled to agree on the best approach to reform. In 2011, they united behind a single measure known as Prop. B, which aimed to save $963 million over 30 years by freezing the portion of city workers’ salaries that factors into their pension payouts. The initiative also called for the city to switch to 401(k) plans for most new city workers, a move projected to cost $13 million over 30 years.

Supporters later gathered more than 115,000 signatures and by late January 2012, the City Council voted to place the initiative on the ballot that June.

Months earlier, then-mayoral candidate Filner floated a pension plan of his own. It included a roughly $125,000 cap on annual pension payouts, a new formula for paying the city’s annual pension bill and unspecified concessions from city staffers that didn’t include 401(k) plans.

Then-City Council President Tony Young said he’d be open to a City Council vote on a competing pension reform measure but Filner’s proposal never materialized.

So days after the City Council voted to put the Republicans’ plan on the ballot, Alvarez emerged with his own policy. It was almost identical to Prop. B with major exceptions: It nixed 401(k) plans and instead capped annual pension payouts at $99,999 for new hires.

In a memo outlining his proposal, Alvarez argued his plan was superior to Prop. B. After all, he wrote, it would allow the city to reap the savings associated with pension reform without the costs.

“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.

Like the Republicans, Alvarez relied on a five-year pensionable pay freeze to deliver those savings.

Both plans raised legal questions, in part because state law bars the city from implementing such a freeze without negotiating with its unions so the savings associated with either measure would require long-term deals with city employees.

But Alvarez’s plan never made it to City Council because Young, a fellow Democrat, refused to allow a City Council vote on Alvarez’s measure.

“This is a pretty important issue, and putting something on the ballot in three weeks without being fully vetted would be a problem,” Young told 10 News at the time.

Voters later approved Prop. B, the measure promoted by city Republicans.

Almost exactly a year later, Alvarez and other city leaders celebrated the unanimous approval of six five-year labor deals that would allow the city to reap the budget savings the initiative sought.

Now Alvarez, the mayoral candidate, claims he touted the idea long before those deals were signed.

That’s accurate. Alvarez did propose another pension reform initiative that relied on five-year labor agreements to accomplish its savings.

But there’s a crucial nuance missing in Alvarez’s statement:  He officially proposed his plan 10 months after Republicans coalesced behind a measure that would later become Prop. B and, in fact, his version was almost an exact replica of that proposal. Only Alvarez’s sections on 401(k) and the pension cap varied.

There’s no evidence Alvarez would have proposed five-year labor agreements without pensionable pay increases if Prop. B hadn’t provided a roadmap for reform. Alvarez’s claims don’t acknowledge that fact so his statement is mostly true.

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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10 comments
Mark Giffin
Mark Giffin

Mr. Alvareze's cap would of been a nice addition but the fact the voters were wise to pass prop B. The underfunding was a bi-partisan gamble with collusion by all parties involved. They had no risk. Unfortunately the taxpayers were not one of the parties involved yet bore all of the risks. Prop B shifted that risk back to where it belongs.....the city employees. That will insure that these types of scams will not occur with the city pensions again. But alas the city leaders, although saying they are committed to cleaning up the pensions, continue to want to short it by keeping the unfunded liability the same. I love pension board president Herb Morgan on voting to not give the so called "savings" back to the city....... .... Board president Herb Morgan.................. “Anytime I see a proposal in a system that’s 68 percent funded and here’s the proposal: let’s lower the plan sponsor’s contribution and let’s lower the participant contributions and let’s all ride unicorns and eat lollipops,” he said. “I want to know how is the system better … off if we lower both sides’ contributions at a time when we’re 68 percent funded.” Sounds like he sees it as more shell games in the system of perpetual debt.

Mark Giffin
Mark Giffin subscribermember

Mr. Alvareze's cap would of been a nice addition but the fact the voters were wise to pass prop B. The underfunding was a bi-partisan gamble with collusion by all parties involved. They had no risk. Unfortunately the taxpayers were not one of the parties involved yet bore all of the risks. Prop B shifted that risk back to where it belongs.....the city employees. That will insure that these types of scams will not occur with the city pensions again. But alas the city leaders, although saying they are committed to cleaning up the pensions, continue to want to short it by keeping the unfunded liability the same. I love pension board president Herb Morgan on voting to not give the so called "savings" back to the city....... .... Board president Herb Morgan.................. “Anytime I see a proposal in a system that’s 68 percent funded and here’s the proposal: let’s lower the plan sponsor’s contribution and let’s lower the participant contributions and let’s all ride unicorns and eat lollipops,” he said. “I want to know how is the system better … off if we lower both sides’ contributions at a time when we’re 68 percent funded.” Sounds like he sees it as more shell games in the system of perpetual debt.

Chris Brewster
Chris Brewster

In my view, Mr. Alvarez's proposal was an ideal compromise for a variety of reasons. As we know, Proposition B is being challenged and may not ultimately pass legal muster. We'll see. In the meantime, there will be lots of money spent defending it. If it is overturned, the results will be chaotic. Mr. Alvarez's proposal would likely have been accepted by all parties and would likely not have presented significant legal hurdles. If would have avoided the up front costs of Prop B (which I personally believe is a financial pig in a poke), limited the excesses that people were particularly concerned about (high pensions), and left San Diego more competitive as an employer (since other cities have not followed suit and dumped their pensions). It is a perfect example of Mr. Alvarez trying to broker a middle way instead of having a showdown. Too bad it wasn't on the table.

Chris Brewster
Chris Brewster subscribermember

In my view, Mr. Alvarez's proposal was an ideal compromise for a variety of reasons. As we know, Proposition B is being challenged and may not ultimately pass legal muster. We'll see. In the meantime, there will be lots of money spent defending it. If it is overturned, the results will be chaotic. Mr. Alvarez's proposal would likely have been accepted by all parties and would likely not have presented significant legal hurdles. If would have avoided the up front costs of Prop B (which I personally believe is a financial pig in a poke), limited the excesses that people were particularly concerned about (high pensions), and left San Diego more competitive as an employer (since other cities have not followed suit and dumped their pensions). It is a perfect example of Mr. Alvarez trying to broker a middle way instead of having a showdown. Too bad it wasn't on the table.

Jim Jones
Jim Jones

"something I presented even before Proposition B " becomes "something I presented even before Proposition B WAS PASSED" in order to give a false statement a mostly true. This fact check feature becomes more of a joke every time a new one is printed. Prop B was not only out and being worked on, it was on the ballot when Alverez issued his version of it, and lets be honest, his version was more union friendly, likely motivated to reduce the impact of prop B rather than to save the city desperately needed funds. Once again we see Fact Check maneuvering that is all about bias and fitting the facts to the desired answer than about truth. I haven't seen Lisa's resume, but I would guess she used to work for Pravda or Tass.

Jim Jones
Jim Jones subscriber

"something I presented even before Proposition B " becomes "something I presented even before Proposition B WAS PASSED" in order to give a false statement a mostly true. This fact check feature becomes more of a joke every time a new one is printed. Prop B was not only out and being worked on, it was on the ballot when Alverez issued his version of it, and lets be honest, his version was more union friendly, likely motivated to reduce the impact of prop B rather than to save the city desperately needed funds. Once again we see Fact Check maneuvering that is all about bias and fitting the facts to the desired answer than about truth. I haven't seen Lisa's resume, but I would guess she used to work for Pravda or Tass.

Chris Brewster
Chris Brewster

Time will tell. As we are seeing in Washington, absolutism has its limits. If Prop B is overturned by the courts, there will be no half loaf. There will be none. As well, it is my evaluation that Prop B will never live up to its promoters expectations (except to stick it to the working class).

Chris Brewster
Chris Brewster subscribermember

Time will tell. As we are seeing in Washington, absolutism has its limits. If Prop B is overturned by the courts, there will be no half loaf. There will be none. As well, it is my evaluation that Prop B will never live up to its promoters expectations (except to stick it to the working class).

Jim Jones
Jim Jones

Alverez's proposal was designed to be union friendly, it left abusive pensions in place, capping them at $1 under six figures, so it really did nothing to fix the issue. I believe the intent was to add a COL increase to the cap as well. It was done AFTER looking at prop B, to attempt to take the teeth out of it. Alvarez is not a man who can fairly govern all of San Diego, he is not a moderate and he is beholden to special interests. He is exactly what SD doesn't need.

Jim Jones
Jim Jones subscriber

Alverez's proposal was designed to be union friendly, it left abusive pensions in place, capping them at $1 under six figures, so it really did nothing to fix the issue. I believe the intent was to add a COL increase to the cap as well. It was done AFTER looking at prop B, to attempt to take the teeth out of it. Alvarez is not a man who can fairly govern all of San Diego, he is not a moderate and he is beholden to special interests. He is exactly what SD doesn't need.