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After months of talk, someone officially proposed an alternative to a high-profile pension reform initiative that will face city voters in June.
City Councilman David Alvarez’s plan does just about everything the pension initiative does except it doesn’t give new employees 401(k) plans. Instead, Alvarez preserved pensions and replaced the 401(k) portion of the measure with a $99,999 pension cap for new employees.
The switch allows Alvarez to make a significant claim about his measure’s benefits: It will save more money. Changing to a 401(k) system for most new hires will cost the city $94 million in the first six years, the city retirement system estimated last spring. To address those costs, backers of the initiative proposed a five-year salary freeze on city employees. Supporters say the measure will save more than $1 billion over the next three decades.
Alvarez’s plan has all the savings without the costs.
“As I outlined last week at City Council, my proposed ‘Cap & Freeze’ pension reform measure … will achieve significant savings without the millions of dollars it will cost the city to implement a new 401(k) style retirement plan,” Alvarez wrote in a Tuesday memo.
It remains to be seen if Alvarez’s proposal will have any traction. The City Council will have to vote to put the measure on the June ballot by next month. Council President Tony Young’s office didn’t immediately respond to a request for comment.
It’s clear that Alvarez, a Democrat, is attempting to undercut the existing pension initiative. The city’s Republican and business interests developed the initiative and spent more than $1 million to qualify it for the June ballot.
Just about every word in Alvarez’s proposed alternative matches the original initiative, save the part about the 401(k). That means Alvarez’s plan suffers from the same legal question marks and lack of guaranteed savings as the initiative.
Most significantly, the five-year freeze on city employee salaries doesn’t actually freeze pay. That would violate state labor law. Instead, the language sets a voter-mandated opening negotiating position that six council members can change. It’s a crucial distinction. Without the freeze, the plan’s savings disappears.
Alvarez hasn’t been the only one discussing an alternative pension measure. Mayoral candidate Bob Filner, who Alvarez has endorsed, has talked about his own alternative for the last eight months, but hasn’t released anything.
I did a Q&A with Alvarez in December where he discussed his reasons for wanting an alternative to the pension initiative:
Do you believe that there is space for an alternative pension measure on the June ballot?
Absolutely.
What would that look like?
Something that doesn’t cost us millions of dollars to switch over and that doesn’t expose us to potentially more if we must re-enter Social Security. I think there’s been a lot of changes over the last several years. Most of the outrageous things that we saw in the pension have been scaled back, they’ve been rolled back. If you believe that that’s the case and that our benefit now is a level that is reasonable …
You’re talking for new employees?
New employees. I think the new benefits are reasonable. There’s no reason to change those. If the freeze of pay is where all of the savings are in this measure, and I’ve seen the numbers and that’s what they show, then perhaps that’s where we should go and we should look at how we could achieve savings that way.
Would you be leading the charge on that? Obviously, it would be something the council would put on the ballot themselves.
I’m talking to Council President (Tony) Young about that because obviously he has to put it on the agenda or we’ll have to find four people that are willing to. Obviously, if something does come, it will come in the next 60 days.
Liam Dillon is a news reporter for voiceofsandiego.org. He covers San Diego City Hall, the 2012 mayor’s race and big building projects. What should he write about next?
Please contact him directly at liam.dillon@voiceofsandiego.org or 619.550.5663.
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