Today I would like to focus on the “summer homework” items that SDI’s chairman, Steve Francis, noted in an opinion piece that first ran a couple of weeks ago. (“An Alternative to City Hall’s Traditional Summer Vacation.”)

The first project called out is to get serious about transitioning at least some city employees to a 401(k) plan. There are some common myths out there that are worth debunking. The first is that employees always do better under a pension plan than they do with a 401(k). That is only possibly true for employees that expect to spend a lifetime of service in the public sector and who expect to make (under the city’s plan) at least one year of fairly high compensation. The city’s current plan functions particularly against employees that work for more than a year (at which point they would start to be entitled to their employers contribution in a typical 401(k)) but less than 10 years (the minimum length of service needed to vest in the city’s current system). These workers get NONE of the employer’s contribution out of the system. For all intents and purposes, such employees are being forced to participate in a poorly performing 401(k) system that doesn’t have an employer match.

The second big myth is that 401(k) plans are necessarily cheaper and that conservatives calling for transition to these plans are simply out to impose draconian cuts that fall heavily on the backs of workers. Not true. The costs of a 401(k)-style plan are almost entirely a function of the match that the employer provides. It could well be that to remain a competitive employer, the city would have to provide a generous match and its costs would be the same, or even higher than the current system. Rather than saving money, the attractiveness of a 401(k) plan is that the costs incurred by the employer are realized in the same fiscal year. They are a known and very predictable share of payroll. Citizens can understand clearly, and without the complex uncertainty of actuarial analysis, what it will cost, in salary and fully loaded fringe benefits to hire, for example, 10 more city employees. In short, 401(k)-style plans vastly increase transparency and it becomes nearly impossible for elected officials to make sweetheart deals in the present, the cost of which is imposed on future generations of taxpayers. For a good introduction in understanding why many conservatives favor these plans see the Pacific Research Institute’s study “Pension Intervention.”

Perhaps a place to begin rolling out these reforms is within the City Attorney’s Office. Typically many members of the criminal division work for the city to get a few years of trial experience before moving onto the private sector. This group of employees thus works less than ten years from the city and is precisely the class of employees which get the deal under the present arrangements. Turnover is less frequent and tenure longer in the civil division but even in this smaller (by head count) division very few deputy city attorneys (DCA) work 30 years to full vesting. Those that do last 30 years typically retire with the kind of large pension that draws the ire of taxpayers and editorial writers. Indeed, if correctly structured in the next contract negotiations with the DCAs, a new 401(k) style plan for DCAs could be cost-neutral and actually help with recruiting efforts.

The second piece of homework Steve talked about was regarding managed competition. By my count it has been 225 days since November 7, 2006, when 60 percent of voters passed Proposition C. The citizens of San Diego deserve to see whether or not the present administration can realize the promises made in the Proposition C campaign — that managed competition will lead to savings that can be used to further strengthen the city’s balance sheet. The clock is ticking and it is past time to get this effort underway.

The final summer special project that was suggested in the opinion piece was reforming the city’s budget process. Take a look at the document. What is striking is how confusing and poorly laid out it is. The public is rightly frustrated because it is impossible to glean from the document how budget allocations translate into the services that they use and that they care about. It is also nearly impossible to know whether taxpayers are (or are not) getting a good deal for their dollars. To take just one example, take a look the budget for the storm drain program that starts on page 339. On this first page it identifies an investment of a bit more than $6 million in “non personnel expenses.” One then has to delve two more pages in (and probably understand city budget speak) to understand that some of this is internally transferred back to other funds (such as $500K to the public liability fund, $23,000 to financial services) leaving a bit less than $5 million transferred to the streets division for storm drain repair. But look as you might in the budget document, there is no further breakdown or specificity. There is little more than nebulous goals and objectives and performance measures in the narrative. Thus citizens who care about clean beaches and bays are left in the dark.

There is a better way. The Government Financial Officers Association has an annual certification awards program for “best in class” budget documents and process. It lists commonsensical ideas, such as presenting all your revenue in one place or listing out the goals and objectives of a department. A worthy task for the city is to undertake a gap analysis this summer — determining what it would take and the changes necessary to be able to qualify for this reward. It might be a small step, but at least the city’s budget document would be clearer and enhance the democratic debate about policy choices and how best to move our city forward.


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