Treaty Talk in Pension Wars

Thursday, March 23, 2006 | For the first time in San Diego’s drawn-out pension battle, San Diego officials sat down Wednesday to talk with the slew of parties currently combating City Hall in various courtrooms around town – although opinions were mixed about the success of the meetings.

The city began the out-of-court mediation with the hopes that the many groups entwined in several pension-related legal disputes, including labor unions and retirees, can manage the city’s sinking debts and come to a less costly and more rapid end to the ongoing controversies.

High-profile civil lawsuits with the San Diego City Employees’ Retirement System, the city’s employee unions and groups of other pensioners threatens to drag along for several years as the city grapples with the repercussions of a pension crisis that has strained city budgets and attracted the attention of state and federal prosecutors.

Currently, the city of San Diego’s retirement plan faces a $1.39 billion shortfall and has about $2 for every $3 it owes to current and future retirees, largely because of pension deals dating back to 1996. The deals, at the heart of the city’s myriad lawsuits, allowed the city to skirt its pension bills while giving employees benefit boosts.

The pension fiasco is playing out in so many venues that a defense lawyer in the U.S. attorney’s criminal case against five former pension officials told a federal judge Tuesday that there “are very few lawyers in San Diego who haven’t been touched by this.”

Now, the city hopes it can solve all of its pension problems at one table. Mayor Jerry Sanders touted mediation as a way to step away from the “circus-like atmosphere” of the enduring debacle, and he hopes that the retired judge overseeing the mediation would suggest a non-binding resolution that the parties could agree on outside of court.

“Everybody got into the room and nobody threw any punches,” said Michael Conger, plaintiffs who are trying to force the city to pay more into the SDCERS fund. “I think people went in there wanting to sit down and solve problems.”

However, some of the other groups who showed up to the closed-door meetings Wednesday said they have no reason to find middle ground with the city.

At stake in the dispute is an estimated $700 million worth of pension benefits that City Attorney Mike Aguirre is challenging in court based on the argument that they were granted illegally. Aguirre alleges that benefits granted in 1996 and 2002 are illegal and void because they were created as part of corrupt deals between the city and the retirement board.

Union attorneys say the benefits granted those years are constitutionally protected and cannot be rolled back under any circumstances.

The city is also trying to mediate a dispute it has with a former employees and a retiree who argue that the city needs to immediately pay as much as $398 million into the SDCERS fund because it skipped out on past pension bills that have left the retirement plan in poor fiscal health.

With the disputes over funding and benefit levels on the table with retired Judge Lawrence Irving, the opposing sides of the debate also seem to have varying views on the usefulness of mediation.

On the city side, Aguirre and Sanders are hoping the unions will budge from their hard-line position that all of the benefits should be paid, and see any relief from the lengthy courtroom battles and the behemoth pension deficit as progress.

“Any day short of five or six years is a victory,” Sanders spokesman Fred Sainz said Wednesday.

Reg Vitek, the outside counsel for SDCERS, said he observed “the attitude of the meeting was that almost everybody was willing to cooperate.”

“I think there are going to be more mediation sessions, I can tell you that much,” Vitek said.

A second round of talks has not yet been slated, attendees said Wednesday.

Not everybody was as enthused.

Council President Scott Peters, who also attended the meetings, said “it was too early to tell if it will lead to anything.”

Attorney David Strauss, who represents nearly 200 pensioners who are not members of any public employee union, said attending was prudent, but also maintained that only a court of law could strip employees of the benefit increases.

“That’s where we intend to get our ruling,” Strauss said.

Union leaders have scoffed at Sanders’ proposal to mediate, saying the city had no leverage to force employees to part with benefits that were already granted.

Ann Smith, the attorney for the 6,000-member Municipal Employees Association, told employees after Wednesday’s meeting that they shouldn’t be expected to budge from the benefit packages that are under fire.

Aguirre, who has butted heads with the unions in the past, said he was pleasantly surprised that the unions attended after initially saying they were cool to the idea.

“Whatever the reason, I’m thankful they came to this forum to help create a solution,” Aguirre said.

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