Statement: “The city’s budget shortfall for the fiscal year beginning next July 1 is $118 million when the true costs of retiree health care are factored in,” Julie Meier-Wright, head of the San Diego Regional Economic Development Corp., wrote in a Union-Tribune op-ed Nov. 4.
Analysis: Much of the debate at City Hall in recent months has focused on how to resolve the city’s annual budget problems and next year’s $73 million deficit.
The deficit represents the difference between how much money the city receives and how much it spends. With slumping revenues and rising costs, city officials estimate that revenue will fall at least $73 million short of their expected costs next year.
City officials proposed a temporary half-cent sales tax increase to help offset the difference, but the measure failed earlier this month. Without more revenue, budget discussions have shifted toward making enough cuts to meet the $73 million mark.
But that still wouldn’t be enough, argues a contingent of business leaders including Meier-Wright. In the Union-Tribune, she noted that the city actually faces a $118 million deficit next year after including the cost of retiree health, the city’s health care plan for retired employees.
As it stands, the city’s contribution to retiree health is expected to cost $123.3 million next year. The city plans to pay $75.5 million, underfunding the plan by $47.7 million.
Meier-Wright and other business leaders say the city should include the full cost of retiree health into next year’s budget calculations. Add $47.7 million to $73 million and you get $120.7 million, a slight error in Meier-Wright’s favor.
So if the $118 million figure is near accurate, why doesn’t the Mayor’s Office use it as the projected budget deficit for next year?
For two reasons, said Jay Goldstone, the city’s chief operating officer.
First, the office has been in negotiations with the city’s labor unions to modify retiree health and lower its cost. If those negotiations do result in lower costs and the estimated shortfall remains at $73 million, the city wouldn’t have to reach as far as $118 million to resolve both. Goldstone said he expected the negotiations would be completed before the mayor proposes his budget in April.
Second, the city isn’t required to pay the full cost of retiree health next year, unlike other annual costs like the city’s pension payment. It would be disingenuous to the public, he said, to inflate the number to $118 million and then offer to defer $47.7 million, which the office had planned to do anyway.
In an interview, Meier-Wright argued in favor of using the $118 million figure even if it would change after the labor negotiations. In the meantime, she said, the public would be better informed about the problems facing the city and could then participate in finding a permanent solution. Deferring the payment makes it less painful for the city to close its budget gap but increases its liabilities over the long-term.
The purpose of this exercise is to check Meier-Wright’s number, not weigh in on which number is the best to use. Since her figure checks out, we’re calling the statement true.
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