Thursday, May 22, 2008 | During his months-long labor negotiations with city unions, San Diego Mayor Jerry Sanders focused squarely on one proposal for a new pension system despite a number of equally effective proposals floating around City Hall.
Implementing a less expensive, hybrid pension plan for new city employees, with the exception of police and firefighters, has been central to Sanders’ platform since his 2005 campaign, and has been the dominant issue in five months of negotiations between the administration and the city’s three non-public safety unions.
After more than 100 bargaining sessions with the unions, Sanders refused to budge from a proposal that purports to save the city more than $22 million in annual pension costs some time in the future. Meanwhile, at least a half dozen other options were developed by groups in and around City Hall, three of which feature savings to taxpayers equal to or better than Sanders’ proposals.
Talks with the unions failed to produce a contract and Sanders declared an impasse, asking the City Council to impose his pension proposal on the unions. A seven-hour City Council hearing last week failed to resolve the issue, even after the mayor at the last minute embraced an alternative plan offered by the Municipal Employees Association. Council rejected the move on a 4-to-4 vote.
The city’s independent budget analyst, Andrea Tevlin, and others have criticized the mayor, saying his intractability and lack of communication with the City Council has made a mess that could have, and should have, been avoided.
“This has been the whole issue that has gone on here in San Diego,” Tevlin said. “We have to keep plugging away to make the process more open and more thought out, and we don’t think it was.”
With the dust still clearing, any number of things could happen; from a continuation of the May 13 meeting to another impasse hearing to a ballot measure in the fall.
Since the beginning, Sanders has pushed to replace the city’s traditional “defined benefit” government pension plan with one that incorporates retirement benefits that are not guaranteed at a set amount, similar to the 401(k) savings plans of the corporate world. He presented a proposal to the unions in March, and briefed the City Council on it in closed session.
The proposal calls for 46 percent of retirement benefits for an employee retiring at 65 to be paid through a traditional defined benefit pension plan, and 24 percent through a 401(k)-like plan known as a “defined contribution” plan. The retirees’ total compensation equals 70 percent of his or her working life income.
Under the current plan, this retiree receives 84 percent of his or her income from the defined benefit plan, and 30 percent from the defined contribution plan. In total, the retiree receives 114 percent of his or her working life income.
Sanders’ proposal promises an annual savings to taxpayers of $1.2 million during its first year of implementation, and an estimated annual savings of $22.3 million in 30 years, when the current crop of new employees reaches retirement age.
The three non-public safety unions say they offered counter proposals that increasingly moved toward the savings in Sanders’ proposal, but could not get the mayor to budge from his original offer. The unions are the MEA; Local 127 of the American Federation of State County Municipal Employees, which represents City Hall’s blue-collar workers; and the Deputy City Attorney’s Association.
And there were other ideas on the table. On April 11, Andrea Tevlin, the city’s independent budget analyst, issued a report that detailed several alternatives to the mayor’s plan.
Under one option, 60 percent of a 65-year-old retiree’s income from the city would come from a defined benefit plan, and 27 percent from a defined contribution plan, and receive 87 percent of his or her pre-retirement income. Another would produce 52.5 percent of retiree benefits through the defined benefit, and 29.5 through the defined contribution plan for a total of 82 percent income replacement.
The long-term annual savings to taxpayers for the plans are estimated at $22.7 million and $21 million respectively.
In her report, Tevlin criticized Sanders for not considering the other options.
Tevlin wrote: “While we support pension reform efforts, we feel that this significant policy decision warrants a thoughtful discussion of objectives for a new City of San Diego retirement package and alternative plans that could meet those objectives.”
Councilwoman Donna Frye chalked the mayor’s movements up to election-year politics.
“In my opinion the mayor has engaged in politics to keep a campaign promise rather than looking at the issue in a reasonable and thoughtful way,” she said.
Sanders spokesman Fred Sainz said such criticism is unfair and inaccurate. It’s the mayor’s job — not that of the City Council or the budget analyst — to negotiate with unions, he said.
“Some people would call it intransigent, I would call it leadership,” Sainz said. “Remember, this is the mayor’s pension proposal, and it achieves the objectives he sought.”
Sanders stuck to his guns until 9 p.m. the night of the impasse hearing, when he shocked the room with an announcement that he would adopt a pension plan proposal by the MEA.
Particularly surprising was that the MEA’s proposal keeps the pension as primarily a traditional defined benefit plan, which Sanders has been saying for years that he wants to reform. The proposal’s estimated annual savings after 30 years is between $25 million and $29 million.
Sainz said the mayor’s announcement showed that he was willing to consider options other than his own. “We did shift based on all that listening,” Sainz said. “If we didn’t I could see the argument. But since we did, it neuters the argument.”
City Council voted down the proposal with a 4-to-4 vote, with Council President Scott Peters saying that voting for Sanders’ last-minute change of heart may have violated council procedure.
Thus an issue that was at impasse two weeks ago is now in limbo and possibly headed for the November ballot.
The Mayor’s Office is crafting ballot language that is expected to be out this week. Meanwhile, Peters is holding out hope that the mayor and the unions can get back to the negotiating table, while City Attorney Mike Aguirre, who supports the MEA proposal, is of the opinion that Peters can schedule a council revote on that option.
Sainz said yesterday that the mayor’s ballot proposal, which will go to City Council this week, “will be somewhere between his original proposal and the MEA’s proposal.”
Frye says all this shows that politics is trumping policy.
“I suspect that this wouldn’t be so difficult if it would have happened last year,” she said.