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Two days before Christmas, City Councilman Carl DeMaio, who’s running for mayor, got on television to denounce the latest “frustrating” shocker coming out of the city’s pension system.
It was an insult on top of all the insults we’ve faced in the pension scandal, he said.
Oh my. What was it?
For the second year in a row, city retirees were collecting the so-called 13th check.
Yes, the good ol’ 13th check — always a reliable outrage provoker.
City retirees get 12 checks a year but on years when the pension fund’s investments have performed well, retirees get a 13th check — usually about $30 for every year of city service they provided. U-T San Diego found in an analysis that more than $73 million had been spent on the perk in the past three decades.
This is obviously outrageous, as the pension fund owes its members far more than it holds in assets. It can’t be giving anything away no matter how well the market performs.
Here’s the thing, though: The city ended the program in 2005 for all new employees. The city concluded the 13th check was a vested benefit, so it couldn’t cut the program for employees hired before then.
This is what happens when you eliminate a benefit for the future. The next day, after you supposedly solve the problem, it’s still there. Even six years later, people will bring it up because the checks will still be going out.
Asked during the broadcast why he was bringing it up, DeMaio said this: “We’re highlighting the bonus check program as yet another example of why this system cannot be sustained. We have to close this pension system down and move employees to 401(k)s.”
And with that, meet the next change for future employees. DeMaio has successfully led the charge to put a measure on the ballot that will ensure most future employees of the city of San Diego do not get guaranteed pensions, but, instead, receive 401(k)-style plans.
The key is the switch to a 401(k)-style plan is just for most new employees. Just like in 2005 when the city eliminated the 13th check for future employees, this change will not affect current workers.
It also recommends the City Council enforce a salary freeze for five years. It will fix the problem, supporters say.
In November, DeMaio called it “the most sweeping financial reform that the city has ever enacted which will solve our pension crisis and allow us to secure our neighborhood services once again.”
His rival, Assemblyman Nathan Fletcher, said it would put the pension issue to rest.
It’s not just them. The promise of this reform is almost mythical.
The problem is the day after it passes (and it likely will) the city’s pension problem will still be there.
In five years, supporters of the switch to a 401(k) for most new employees predicted that the city will have to make a payment of $337 million to the pension system even if the measure passes. Now the city has dramatically lowered its predictions of pain to come. But pick your prediction; the fact is we have many, many years ahead of pension payments well above $200 million — more than the cost this year of the Fire-Rescue department.
To put that in perspective, in 2002, the city sent the pension system only $50 million.
In five years, it’s likely that DeMaio, or someone like him, will sit in a TV studio and rail against all of the employee pension checks going out the door.
That’s because the city made great promises to its current employees but never raised the money to pay them. The measure does not change this. The annual bill the pension system sends us continues to climb.
How could this be? Well, you have to go back to the last time we changed things for future employees. In 2008, the mayor succeeded in negotiating with unions something he called “Comprehensive Pension Reform.”
The reform hacked pensions down to a level arguably no better than what workers in the private sector get. After all, city employees do not receive Social Security.
Unfortunately, remember what happens when you change benefits for future employees. You wake up, and the problem you were trying to solve is still sitting there.
So now we’re going to … wait for it … change benefits again for future employees. Next year watch for more of these ideas to emerge.
They will until this fundamental fact about the city changes: The city is not set up to take in as much money as it is set up to spend.
Until it’s fixed, for real, services will continue to erode. The quality of streets will falter. Our infrastructure will continue to crumble.
Right now, the city figures it would take $840 million to catch up on its neglected buildings, roads and storm drains. No money for this exists. The only idea the mayor has offered is to borrow money.
The mayor warned, in 2010, that without a tax increase, the city would have to cut police and fire. It did not. Voters did not approve the tax hike. The city did not cut police and fire.
That said, it’s become clear that if you want to protect police patrols in your neighborhood, you’re going to be told by the city to find the money yourself through charitable donations.
The Saturday of Labor Day weekend, at 11 a.m., the pool at the City Heights Recreation Center was closed. I can’t imagine a more important day to have that open. But the city can’t afford it. Library hours are trending toward extinction. Only a select few are open Sundays and that’s largely because of donations from neighbors or concerned philanthropists.
The mayor’s staff now contends that this is what the citizens chose when they rejected his tax increase.
The city remains broke and broken. This year, watch for a few things:
• The mayor’s budget. His proposal will come in April. Does it change the dynamic, significantly reducing costs or raising revenues? It appears as though the pension bill this year will not be as bad as it was expected, which should make the process easier.
• The mayoral race. How will the candidates change the fact that the city is set up to take in less money than it’s set up to spend? Bob Filner, for instance, has been promising for months a plan that will neither raise taxes nor cut employee benefits? Where is it?
• Infrastructure: The mayoral candidates and city leaders are all flirting with plans to rebuild the city’s crumbling streets and facilities. Follow these closely.
• Police. New police officer recruits were spared the pension reform. But DeMaio has pledged to change this. Will he?
Wednesday, the mayor proclaimed we were close to done with pensions:
“And by the time I leave office, we’ll have put our pension problem to bed once and for all.”
If only we were so lucky.
I’m Scott Lewis, the CEO of voiceofsandiego.org. Please contact me if you’d like at email@example.com or 619.325.0527 and follow me on Twitter (it’s a blast!):
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