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Analysis: The rising cost of employee pensions contributes to San Diego’s structural budget deficit — meaning the city is set to spend more than it takes in. Because pension costs continue to rise faster than revenue, the city ends up cutting its budget each year in order to pay its pension bill.
Now, an effort to address the structural deficit is on the November ballot. If passed, the measure would increase the sales tax after the city completes a series of reforms. Some aim to cut future pension obligations.
Appearing on KUSI, DeMaio argued against increasing the sales tax to offset pension costs. Even after increasing the sales tax by half a cent and collecting an estimated $103 million annually, he said the city still wouldn’t have enough money to overcome future pension costs. “No tax is big enough to feed that monster,” DeMaio said.
To support that argument, he pointed to the pension system’s projections. Apart from his appearance on KUSI, DeMaio has also used this argument in constituent mailers, press releases and this recent Union-Tribune editorial.
In fact, his numbers are pretty close. According to the pension system’s most recent estimates, the city’s pension payment went from $154 million last year to $229 million this year, and it’s projected to reach $340 million by 2016 and $508 million by 2025.
Since DeMaio’s numbers nearly mirror the pension system’s estimates, we’re calling his statement true. Starting this fiscal year, employee pensions are estimated to cost about $20 million more every year until 2025. After that hump, changes to the pension system are projected to reduce the city’s annual cost dramatically.
In December, the pension system’s outgoing administrator called DeMaio’s use of the numbers misleading. He criticized DeMaio for ignoring inflation adjustments and not mentioning the drop after 2025. While valid concerns, they don’t affect the accuracy of DeMaio’s statement. He got the numbers straight from the pension system.
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— KEEGAN KYLE