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Judie Italiano, the president and general manager of the 6,000-member Municipal Employees Association, said in letter sent to union board members Wednesday she is abdicating her presidency because she expects the city’s retirement board to approve her retirement application, which has been delayed for two years because of questions surrounding the way her pension check is to be calculated.

“While we have been dedicated to the fight to protect every employee’s pension benefit, I have worried for the past two years whether I would have any pension benefit at all – and after nearly 28 years of service and my 60th birthday just passed, that has been some worry!” Italiano wrote in a letter to MEA board members.

Italiano will continue in her full-time capacity as the union’s general manager, although she says she will do so only for a few months. During that time, she will be eligible to earn both a city pension and her salary as MEA’s general manager.

Italiano says she is most proud of the union’s ability to dismantle a two-tiered pension system that former Mayor Pete Wilson created in the 1970s, which created an imbalance of benefits. She said it was a “bittersweet hallmark” because Mayor Jerry Sanders has pledged to set up a separate pension system for future that will likely result in less employee benefits with more predictable costs for the city.

Her union’s bargaining prowess generated the pension increases that are allegedly tied up in complex arrangements involving the city, its labor groups and its retirement board that are being contested in high-profile civil and criminal court cases. Italiano has not been charged in either of the two pending criminal cases, but members of her union, including her immediate successor John Torres, have been touched by the scandal.

During her tenure, Italiano has won fierce support from many of the union’s white-collar members, but has also drawn criticism from those who argue that her tenure was marked with abuse.

Jim Carter, a 20-year city employee and MEA executive board member, said workers should be grateful for the benefits she helped negotiate.

“She’s made a difference in so many people’s lives and most people she represents don’t even know it,” Carter said, referring to the contractual gains employees have made in a city that is otherwise strapped for cash.

John Kern, who served as political consultant and chief of staff to former Mayor Dick Murphy, said Italiano was a tireless champion for employees who boosted the role of her union in the city’s affairs over the years.

“I think under her leadership MEA became a player,” Kern said.

But at City Hall, not everyone is as enamored.

Councilwoman Donna Frye, who has routinely drawn support from unions but clashed with MEA over the city’s current fiscal crisis, said Italiano did a disservice to city workers by obscuring the magnitude of the city’s fiscal problems, which include billion-dollar pension and retiree healthcare deficits that her members and taxpayers will have to pay off over time.

“I don’t believe the employees were told the truth about the seriousness of the financial situation,” Frye said.

The pension crisis has chewed up increasingly large parts of the city budget and voters’ attention, reaching great heights as the elections and spending plans of the past two years have been dominated by city’s pension crisis.

The pension board’s approval of a 2002 agreement with the city that allowed the municipal government to skirt its pension bill has caused federal and state prosecutors to file conflicts of interests against a total of eight retirement officials, including two MEA members who served on that year’s pension board. Torres, a fingerprint examiner, and management analyst Sharon Wilkinson, will stand trial in the district attorney’s case later this year.

Italiano herself has taken heat for her own pension benefit, which allows her to use her union salary when calculating her future retirement pay, rather than her salary as a payroll specialist. She was awarded the benefit by virtue of being president of MEA, but she only receives checks from the union for her role as general manager.

City Attorney Mike Aguirre, the most vocal critic of the city’s pension dealings, has called for her resignation countless times. He has accused the city and her union of carving out a special benefit for Italiano in order to get her to influence the MEA members on the pension board to go along with the pension deals he is attacking, which he claims will hurt employees in the future because there won’t be enough money.

The retirement system’s acting general counsel, Roxanne Story Parks, said the existence of the “presidential benefit” caused tax concerns. She said that the tax-exempt status of the San Diego City Employees’ Retirement System was put into jeopardy because the union was picking up a portion of Italiano’s pension contribution. Usually, only an employee or the governmental agency can put money into the pension system. Since February 2004, the union has stopped paying for the benefit.

SDCERS spokeswoman Rebecca Wilson said she expected Italiano’s benefit to appear on the retirement board meeting agenda next Friday, but said there was no report detailing the amount of her benefit.

Italiano, a payroll specialist when she was still working full-time with the city, has been peppered about her reach over union matters to the point that two former MEA officials started their own slate to run in this year’s union elections, one of them for president. They call themselves the Vote for Reform Committee and allege Italiano operates the union like a personal piggy bank for her and her family.

The election, which has drawn sporadic attention outside the union, was shaping up to be a brutal contest as allegations flew from both parties only to be denied by the other side.

Now, Torres will carry the torch in the next year’s election, which has chafed Italiano’s opponents, especially with Italiano serving as the senior staff.

“It’s going to be business as usual,” said Linda French, who is running for president.

Italiano said she wants to stay on with the union for as long as it took to “see the retirement issue through,” but did say she’d throw in the towel if the battle isn’t wrapped in the next decade.

“Until then, I’ll serve at the pleasure of the MEA board,” she said.

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