Why the Pension Story Dominated This Mayoral Campaign

Monday, July 25, 2005 | In late June, while the San Diego City Council was trying to tie off the loose ends of a sprawling government budget, the newest of that body’s members, Councilman Tony Young, began to press city staff on a technical point.

His question was essentially this: How did city staff estimate how much money San Diego would collect in taxes over the next year?

After a bit of discussion, it became clear that his point was essentially this: City staff just guess how much money will come in. That guess is usually low, so why not make it about $100,000 higher this year, so that I can save funding for the Mt. Hope Cemetery.

The cemetery, he said, has traditionally been a benefit to low-income people in his district seeking a dignified resting place for their loved ones.

City staff, Young said, had made a prediction that the city could expect about $647 million in tax revenue from certain sources. What’s $100,000 more going to do to such a massive budget?

“When we talk about $100,000 for Mr. Hope Cemetery, that’s really kind of peanuts here,” Young argued.

He quickly found out that along with money, the city has run out of peanuts, too.

City Manager Lamont Ewell told him why.

The city was not giving proper funding to virtually all of its departments, Ewell said. Something might come up this year: a fire, an earthquake, a melee of drunk beachgoers, another special election or anything that makes a police officer work extra overtime. And there’s no money set aside for extra expenses like that.

The city will most likely have to make adjustments in the middle of the year to pay for costs they didn’t budget for now, Ewell said.

If you’re trying to figure out why the pension story is such a big deal, look no further than the discussion above.

A couple of weeks ago, a few of us thought the city had reached a rhetorical turning point – that the seemingly perpetual discussion about the pension problem had moved on to a discussion about how to fix it rather than whether there was even a problem.

I wrote a column about that.

I spoke too soon.

The city’s pension board and its new president Peter Preovolos have reignited that discussion. Ask him, and he’ll tell you there is no problem with the city’s pension system.

None. It’s nothing, he said, that the pension fund’s strong investments won’t clear up in time. Preovolos has even reportedly followed the lead of previous pension board leaders and hired a public relations firm since he apparently thinks that the pension system’s issues are problems only in the sense of how they are understood.

Inspired by his stance, others who have long held that same view have come out with expressions along the same ilk: That the city’s employee pension fund is no less healthy than others, that the issue has been trumped up by people who have ulterior motives in proving that the city is in crisis, and that the media does not understand and exaggerates the problem.

So the question then is: Why is the pension a story? Why has it dominated media reports about the city for three years? Why is it the most important topic at the mayoral debates?

There are dozens of answers but one stands out above the rest. There is a massive amount of taxpayer money going into the pension system – much more than in previous years. Yet even this infusion of cash hasn’t stopped it from actually falling into more of a deficit. Take the last three years for example. In fiscal year 2003, the city put $85 million into its employee pension system. This year, the payment was more than $160 million.

That’s a difference of $75 million.

That would pay for 750 Mt. Hope cemeteries.

Whether it’s wrong or not, legal or not, smart or not, the fact is millions and millions of taxpayer dollars are on their way to the pension system. Yet all the while, the shortfall in the retirement fund, now estimated at $1.7 billion, continues to increase.

How is a public relations firm going to spin that? Add on the non-disputed details that there are multiple ongoing federal and local criminal investigations and that the city does not have access to the bond markets, and you have a pretty interesting story.

And it’s not just the media telling it.

Just this week, the San Diego Taxpayers Association and April Boling, the former head of the city’s Pension Reform Committee, held a press conference to announce that they believe the pension board, headed by Preovolos, should be disintegrated for the time being and replaced with a court-appointed receiver.

This is a huge move for Boling, considering she helped lead the drive to refashion the board into its current state. She said the board is not seeking any outside input into its decisions about everything from budget matters to whether or not to waive its attorney-client privilege, which is considered a pivotal step toward allowing the city to placate federal investigators and financial auditors.

And, Boling says, Preovolos’ contention that there is no problem in the city’s pension system is one reason it’s time to temporarily put the pension system into the hands of a court-appointed receiver.

“The very fact that Mr. Preovolos is choosing to raise the question of whether or not there is even a problem in the pension system is an indication, in and of itself, that a receiver is needed,” Boling said.

How is that an indication?

“Because it is an ignorant statement. I would have expected more from the chairman of the pension board,” she said.

Scott Lewis is a former reporter at The Daily Transcript. You can e-mail him at