Wednesday, Nov. 1, 2006 | During opening arguments Tuesday, City Attorney Mike Aguirre told the judge presiding over San Diego’s major pension case that the only way to save the city’s retirement system from running dry is to roll back $500 million worth of employee benefits.
Aguirre used his first presentation in the case to propose a plan for shedding the city’s $1.4 billion pension deficit of retirement benefits created in 1996 and 2002, a move he said would help employees attain a secure pension plan.
“This is about restoring the actuarial soundness of the system by removing the rotten core of unfunded benefits,” Aguirre said.
Employee union leaders have vehemently disagreed, saying the city – whether it can currently afford it or not – is bound by law to pay the pension enhancements that are at the center of this trial. Critics, including some members of the City Council, have also argued as much.
Because Superior Court Judge Jeffrey Barton has limited the scope of the issues he will deal with during the trial’s opening phase, Aguirre didn’t use his opening statement to attack the 1996 and 2002 pension deals he is challenging.
Instead, attorneys in the trial’s first phase are largely confined to dealing with legal issues, such as which points can be argued in the latter stages of the trial. They’ll also argue about whether the judge can actually scale back pension benefits if the deals they were part of are found to be illegal.
Aguirre contended that the judge could set aside the benefits, but advocated for a layered ruling that would put the onus on the city and its unions to develop a plan for cutting the city’s pension debt.
The city attorney asked Barton to rule on his allegations that the pension agreements violated a state conflict-of-interest law as well as a section of the state constitution that prohibits the city of San Diego from incurring more debt than it can pay off in a year without a public vote.
If the pension deals are found to be illegal under those laws, Aguirre wants to bring that news to the City Council to convince them that they must work with the unions within 90 days to roll back the benefits he is challenging.
The city attorney said such a ruling would force the city and union leaders to fix the city’s pension debacle themselves.
“The judge shouldn’t have to fix this on his own,” Aguirre said.
If the City Council or the unions balked at settling the case, Aguirre said he would return to court to ask Barton to deflate the benefits through judgment.
Union leaders instantly said they were skeptical. They accused Aguirre of using the court’s potential conflict-of-interest ruling as a “club” to force employees to give back benefits they already earned.
“I think the judge has no desire to be used in that capacity,” said Judie Italiano, the general manager for the white-collar Municipal Employees Association.
But employee representatives also said Aguirre’s plan was “highly unlikely” because it has no precedent. Joel Klevens, the attorney for City Firefighters Local 145, asked the judge to rule on the case’s merits immediately after Aguirre presented his proposal, claiming it was not legally viable. However, Barton said Klevens’ request was “procedurally inappropriate.”
Aguirre’s proposal also fails to clear up what appears to be the struggle most prominent in the judge’s mind: Whether benefits, which the unions argue to be constitutionally protected, can be set aside if of a conflict-of-interest violation is proved.
In hearings and rulings leading up to the trial, Barton said he had not encountered any case that deals with those competing laws.
Italiano reiterated Tuesday that employees would not concede any benefits unless the judge forces them to.
“There is no compromise,” Italiano said.
Aguirre said he remained confident that the judge would side with his argument that employees are only entitled to a financially healthy retirement fund and not a cemented set of benefits.
He sites a court case that states, “Under settled California law, the employee does not obtain prior to retirement any absolute right to fixed or specific benefits, but only to a substantial or reasonable pension.”
“Everyone’s goal should be the system,” Aguirre said, “not their individual self interest.”
Aguirre’s declaration that the city is unable to pay its mounting payroll costs comes on the same day the City Council’s independent budget analyst reported that “the City cannot continue to hobble along year-to-year barely making its payments.” The report lays out the city’s plans thus far, which are described as being “past due.”
The city attorney told the judge that the current legal challenge is the “last weigh station on the road to bankruptcy for the city of San Diego,” claiming the city will become insolvent as its payments toward the pension fund and retiree health care costs escalate.
MEA attorney Ann Smith opened up the trial for the employee groups yesterday, claiming that Aguirre’s case cannot go forward because the city missed its chance to raise the city attorney’s current arguments in past legal settlements.
Lawyers for the San Diego City Employees’ Retirement System will likely be inactive until after the judge rules on the legality of the benefits, at which time the city’s bill for repaying the system for past underfunding is expected to be set.