With the city of San Diego’s retirement board decision in the bag, the gaze returns to the city and its budget woes.
Like yesterday, Jay Goldstone, the city’s COO, said layoffs were coming if the retirement board decided not to change a pension accounting rule (known as the “corridor”) that would have the effect of lower the city’s pension bill. These layoffs would be more than the city was already likely to make. In light of the board’s decision not to change the corridor, the pension fund is stronger, but the city’s budget is $30 million weaker.
Today, Goldstone quantified his statement.
The board’s decision, Goldstone said, “means that 300 to 400 positions will have to be cut on top of other cuts we’ll have to make. It also means we’ll make the payment.”
The city’s payment is now estimated at $224.8 million. With a change to the corridor, the payment would have been $193.2 million. Pension board members had considered a corridor change to address substantial investment losses last fiscal year. Critics said doing so would have renewed a scandalous history of underfunding the pension today at tomorrow’s expense.
Goldstone said next year’s deficit stands north of $100 million. Now he is able to plug the pension commitment into calculations for the city’s next five-year financial outlook, which he said will be ready by early October.
Along with layoffs and service cuts, Goldstone said the city would continue to examine pension reform. The city has union negotiations with police, Local 127 blue collar workers and the Teamsters this year. Goldstone said the city is not looking to reopen two-year contracts it signed with other unions last year.
Four City Council members were on record against the corridor change. Councilman Carl DeMaio’s budget director and Councilman Kevin Faulconer spoke to the board before its decision and told the board not to change the corridor.
“If that was the choice that would be repeating the mistakes of the past and I know this board is not interested in that,” Faulconer said.
The pension board’s direction was clear from the time it began talking. As soon as discussion began, board President Mark Sullivan, a representative from the Police Department, made a motion not to change the corridor. A series of board members rushed to second the motion.
The two board members who ultimately voted against Sullivan’s motion, Steven Meyer and Gregory Bych, spoke during the meeting and outlined their opposition. Meyer, a senior chemist in the Wastewater Department, said changing the corridor gave the city more options. If the pension board sent a lower bill to the city, City Council could choose to pay more. Bych, the city’s director of risk management and a mayoral appointee to the board, believed that since both options before the pension board were actuarially sound, the corridor should be changed to spare taxpayers a larger bill.
The motion to keep the corridor as is passed 10-2 with board member Wayne Kennedy absent. Kennedy did have a statement read at the meeting that opposed changing the corridor.
Asked after the meeting why he voted as he did, Sullivan said the city didn’t ask him to make any changes.
“Actually I could have gone either way,” Sullivan said. “I thought both of them were appropriate. I was basing my decision on the fact that the plan sponsor really didn’t ask us for any relief. If they feel they’re in a financial position where they can make a full payment that will be the option they would probably choose.”