Fact Check: Cutting the Budget With Carl DeMaio

Statement: “I have outlined ideas that produce budget savings in excess of $90 million annually — and savings that can be achieved in the FY 12 budget.” City Councilman Carl DeMaio, in response to a question about his budget cut ideas in voiceofsandiego.org, Oct. 13.

Determination: Barely True

Analysis: The central question in the debate over Proposition D, the city of San Diego’s sales tax and financial reform ballot measure, is whether the city could solve its longstanding budget problems and maintain service levels without a tax increase.

City Councilman Carl DeMaio, a Prop. D opponent, argues time and again the city can do it. But, as we’ve reported, he’s not releasing a competing plan until after Election Day.

Even without a comprehensive financial plan, DeMaio says he’s identified enough cost savings ideas to take a huge bite out of the city’s $70 million-plus deficit. He says he’s found $90 million the city could save starting next fiscal year, which begins July 1, without cutting police, fire or other core services.

In response to our questions about the estimate, DeMaio’s office produced a spreadsheet showing $90.4 million in savings he argues could be achieved by next year. There’s even more savings, his office said, but it stopped counting once it reached $90 million.

DeMaio’s proposals focus on outsourcing and privatizing city services and cuts to employee retirement benefits.

Here’s the full spreadsheet. We’ve highlighted three of the big-ticket items on DeMaio’s list that exemplify the steep challenges some of his ideas face.

• Cut Retiree Health Care: $18.4 million

DeMaio’s spreadsheet includes savings from the city eliminating retiree health care for all existing employees. (Current retirees’ health care wouldn’t be touched). DeMaio cites City Attorney Jan Goldsmith’s opinion that the benefit isn’t guaranteed for current employees.

But city labor unions disagree. And if the city makes such a drastic cut unilaterally, the unions have said they will sue.

DeMaio also noted that he’s citing potential savings from eliminating retiree health care now, but hasn’t committed to the idea in his comprehensive budget package.

• Privatize the Landfill: $15 million-$25 million

At a minimum, the city should be able to save $15 million next year from privatizing the Miramar landfill, DeMaio argues. This estimate assumes a private company would pay the city that amount to operate the landfill. But he’s the only city official going that far definitively. DeMaio cites an exchange between himself and city Chief Operating Officer Jay Goldstone at a recent council committee hearing. Goldstone responded to a DeMaio question by not ruling out that the city could save as much as $20 million from privatizing the landfill. But he doesn’t state that will happen, either.

Goldstone’s official estimate is that landfill privatization would save at most $10 million. He reiterated that estimate in an email.

“I have no idea where Carl got this,” Goldstone wrote.

• Eliminate Extra Pension Benefit: $9.1 million

The city provides a retirement benefit, known as the Supplemental Pension Savings Plan, to some employees. The plan, created when the city left the Social Security system, is similar to a private sector-style 401(k)-plan with an employer match. Employees receive it in addition to their pensions.

DeMaio argues that the city should eliminate the benefit entirely. But his assertion runs into legal problems. Goldsmith believes the benefit is guaranteed to employees who have it. Even if it isn’t, the city’s top labor negotiator said the employees who have the benefit would have to vote to eliminate the plan for themselves.

DeMaio says city employees have history of adjusting the benefit, and that’s true. Some employees agreed to forgo the city’s match to the benefit as part of pay cuts last year. If employees don’t agree to eliminate the benefit, DeMaio said, the city can threaten other pay cuts.

All together the three budget cuts we’ve analyzed represent a little less than half of DeMaio’s $90 million figure. Though he argues he’s identified savings beyond $90 million, we believe this sampling is a fair example of his cost-cutting ideas.

To recap, one of the three cuts would lead to litigation, the second assumes more savings than anyone else has documented and the third relies on a different legal interpretation than the city attorney and Mayor’s Office.

DeMaio’s math isn’t wrong. His ideas, if implemented the way he believes they could be, could lead potentially to $90 million in savings.

“There’s more than enough cost saving ideas to balance the budget without tax increases,” DeMaio said. “That’s what we said all along and we’ve documented that.”

What DeMaio’s original statement lacks, however, is any acknowledgment of the substantial legal and private sector bidding assumptions his estimates require.

Our definition for Barely True is a statement that has an element of truth, but lacks critical context that could alter the impression that statement leaves.

DeMaio’s statement fits that definition. His numbers aren’t wholly inaccurate, but his use of them conveys the city could solve its budget problems much easier than possible. At the least, it’s unlikely all of the savings could be realized by July given the legal and political challenges they would face.

If you disagree with our determination or analysis, please express your thoughts in the comments section of this blog post. Explain your reasoning.

You can also e-mail new Fact Check suggestions to factcheck@voiceofsandiego.org. What claim should we explore next?

Please contact Liam Dillon directly at liam.dillon@voiceofsandiego.org or 619.550.5663 and follow him on Twitter: twitter.com/dillonliam.