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Statement: “When also accounting for fringe benefits, the legislative compensation totals $135,912. You will note the exorbitantly high amount, $38,190, for pension benefit contributions,” City Councilman Carl DeMaio wrote in open letter to Mark McMahon, president of the city’s Salary Setting Commission, Feb. 9.
Determination: Mostly True
Analysis: DeMaio’s statement came in response to a proposal by the Salary Setting Commission to dramatically increase the annual salaries for City Council members, who each currently get around $75,000.
DeMaio objected to the proposal, saying council members are compensated much more than $75,000. His calculation assumes the city will pay about $75,000 for salary, $38,190 for toward the pension system and $22,000 for other benefits to each council member. We wanted to check out the pension contribution — the $38,190 figure — because it seemed like a high estimate.
But, as it turns out, taxpayers will contribute the equivalent of 51 percent of the council members’ salaries to the pension system to pay for their retirements (51 percent of $75,000 is $38,250).
Here’s how DeMaio came to that number: He asked for it. The city’s financial management department provided it. How did they come to it? From this.
Every year the city’s retirement system sends the city a bill composed of two parts.
The first is the normal cost: this year’s price tag to keep the pension fund from falling behind. The second part is the ongoing effort to pay down the massive deficit created by not contributing what it should have in the past.
Despite their comparatively low salaries, the city’s elected officials have good retirement benefits. To fund the cost of that benefit this year, the city will have to send the retirement fund the equivalent of 20 percent of their salaries. It will pitch in another 25 percent of their salaries to pay for the old built-up deficit. In addition, the city has promised them that it will contribute nearly 6 percent of their salary more.
Why? Because that’s the deal right now. We as a city have decided we don’t want them to contribute their full share, so we pay that 6 percent for them. And all that added together equals a match of 51 percent of their salaries.
Next year, with the pension system collapsing, unless something changes, taxpayers will be on the hook to match the equivalent of 76 percent of elected officials’ salaries. The jump will come largely from the fact that the pension deficit continues to grow. The equivalent of 39 percent of elected officials’ salaries will go to pay that off. Another 31 percent will go to pay the normal cost of the benefit.
It is important to remember, though, it’s not like council members are actually being compensated with $135,000 right now. That’s just what it costs to give them all this guaranteed retirement benefit. Some of their pension contributions are paying for retired mayors, city attorneys and City Council members. They will have to wait to get their own share.
How much they ultimately collect will depend on how long they live and how many years they serve the city.
And that’s why his statement is mostly true.
— SCOTT LEWIS