As time runs down in San Diego Mayor Jerry Sanders’ tenure, his proposals to solve the city’s financial crisis are becoming more drastic. This summer, he embraced a tax hike. Friday, he proposed 401(k)-style retirement accounts for most new city employees, and in turn, eliminating their pensions.
Staring him and everyone else in the face is a $70 million-plus ongoing deficit, one that neither a tax increase or a pension elimination will fix. The tax hike won’t work because voters said no. The pension elimination, which also needs voter approval, won’t save any money for years and wouldn’t go on a ballot until next year at the earliest.
Sanders has two more years to solve the financial problem he was elected to fix. Friday, he recommitted to the task.
“I won’t pass the structural deficit on to the next mayor,” Sanders said.
As he tries to fulfill that pledge, Sanders’ proposals include the familiar: All the reforms tied to the Proposition D tax hike. They include the major: Consolidating departments and potentially privatizing the city’s airports and golf courses. And they include the minor: Ending free trash pickup for 18,000 homes on privately owned streets and using more energy-efficient bulbs in street lights.
But the mayor didn’t know how much they’ll save — and whether it will be enough to keep from cutting core services like police officers, firefighters, parks and libraries.
“Public safety is not off the table,” Sanders said. “When it’s 50 percent of the budget, we have to look at that. I’ll certainly try to minimize the impact, but there’s going to be impacts.”
Though a plan to eliminate pensions does nothing to the city’s finances in the short term, it turns the city’s political equilibrium back to where it was before the mayor joined Democrats on the City Council, labor unions and legacy business organizations to promote the sales tax increase.
Republican Councilman Kevin Faulconer, a Prop. D opponent, this time joined Sanders. Republican Councilman Carl DeMaio, also a Prop. D opponent, tried to outflank them with his competing financial plan, saying it cuts retirement benefits even more. And the city’s labor unions decried all three of them.
This time, the stakes are much higher. Though cities across the country face similar pension debts, few if any have attempted to replace pensions entirely with 401(k)s.
“Nationwide,” said Marcia Fritz, a California accountant and pension reform hawk, “I don’t know any.”
Details of how the new 401(k) plan would work are sparse. Sanders said it would exempt police officers and firefighters. He didn’t say how much it would save, just millions.
Under Sanders, the city already has reduced traditional pension benefits for new hires. But it hasn’t completely eliminated them as the mayor proposed Friday.
Sanders said he didn’t know the legal ramifications of eliminating new pensions. The city has opted out of the Social Security system, leaving retired city workers without that income.
Labor leaders said they knew the ramifications: If there isn’t enough in future retirees’ 401(k)s, they would be left with nothing.
“This isn’t about legal requirements, this is about moral requirements,” said Lorena Gonzalez, secretary-treasurer of the San Diego-Imperial Counties Labor Council. “What type of employer, let alone a city, says a good idea is to leave workers with no safety net? The fact that I don’t think the IRS and the Social Security Administration would allow it is secondary.”
Replacing pensions with 401(k)s for new hires already was a part of DeMaio’s 80-page financial proposal released two weeks ago. He’s holding a rally Monday with the head of the local Republican Party and the fiscal conservative Lincoln Club to promote his reforms, which also seek to cut current employees’ pay and benefits, through an initiative.
DeMaio believes there’s only room on the next election ballot for one reform initiative: His own.
“It’s chump change compared to the reform we need,” DeMaio said of a solely 401(k)-based ballot initiative.
Now, with DeMaio, former City Attorney Mike Aguirre and now Sanders proposing draconian cuts, city Democrats and labor leaders now are lacking a plan of their own.
Gonzalez said she was ready to help work on one.
“Clearly, there needs to be a comprehensive plan,” she said. “I haven’t seen one that’s really aimed at fixing the structural deficit in an ongoing way that preserves city services, that preserves just basic human dignity for workers. I think that that’s problematic.”
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