Statement: “A groundbreaking pension reform ballot measure would save San Diego taxpayers up to $2.1 billion, according to a comprehensive financial analysis released today,” Lani Lutar, president of the San Diego County Taxpayers Association, in a press release June 30.
Determination: Misleading
Analysis: Supporters of a ballot measure that would replace pensions with 401(k)s for most new city of San Diego employees released a financial analysis of the measure last week.
The “low savings scenario” projects $1.3 billion in savings over the next 27 years. The “high savings scenario” projects $2.1 billion in savings over the same time. They said the estimates represent the range for how much the measure could save.
But the $2.1 billion estimate relies on a faulty comparison that distorts the numbers to the supporters’ benefit.
The $2.1 billion estimate projects city workers will receive 2 percent annual raises under the 401(k) plan after the first five years. At the same time, it projects city workers will receive 4 percent annual raises under the existing pension plan after the first five years.
It’s a key difference that widens the savings gap. If salaries only increase by 2 percent, then the pension system would have seen major savings, too.
For the comparison to be fair, it would need to assume the same pay increases since it’s supposed to be a contrast between the costs of two different systems under the same circumstances.
In presenting their numbers last week, supporters of the measure agreed the salary figures weren’t comparable. But they said they wanted to estimate savings based on the current scenario. Since the existing pension system assumes 4 percent salary increases, they argued, the $2.1 billion estimate is legitimate.
But if the city were to save that much after the initiative passed it would have nothing to do with the measure. The savings would come from the city deciding not to pay its workers any more, a move it could make in any scenario.
San Diego County Taxpayers Association President Lani Lutar said backers have since re-run their estimates based on 4 percent salary increases for the 401(k) plan. That projection shows $1.9 billion in savings over 27 years, a $200 million difference.
“If people want to argue the measure only saves $1.9 billion, that’s fine,” Lutar said.
But she said that the initiative’s backers will continue to use the $2.1 billion figure. She argued they presented a range of savings. If people want to quibble with the salary projections, they should also credit reforms not included in the estimates, such as reduced pensions for new police officers.
Our Fact Checks typically don’t rate future projections False. We’re not soothsayers. For now, estimating $2.1 billion in savings through the 401(k) ballot measure relies on a faulty assumption that distorts numbers to the supporters’ benefit. We’re labeling the claim Misleading.
If you disagree with our determination or analysis, please express your thoughts in the comments section of this blog post. Explain your reasoning.
Update: We originally attributed this statement to Lincoln Club head T.J. Zane because his name was listed atop the press release as the media contact. After we published it, however, both Zane and San Diego County Taxpayers Association President Lani Lutar said it isn’t Zane’s statement. Accordingly, we’ve changed the attribution to Lutar. Her organization handled the fiscal analysis.
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Please contact Liam Dillon directly at liam.dillon@voiceofsandiego.org or 619.550.5663 and follow him on Twitter: twitter.com/dillonliam.