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Last November, we published a Reader’s Guide on the city’s pension initiative, which now is known as Proposition B. At the time, we called the piece our initial guide on the topic.
But what was expected to be a furious campaign over pensions vs. 401(k)s for city workers hasn’t been. The fundamental issues about Prop. B remain the same as they were when we did our first story.
Check out that piece for easy-to-understand descriptions of what the initiative will do, the mayoral candidates’ positions and the Social Security issue. There’s even an explainer video with Lego people.
Here’s an overview of what you need to know about Prop. B since our November story published.
The Savings
The savings in Prop. B comes from something other than the switch to 401(k)s for most new employees, what’s been dubbed a “pensionable pay freeze.” It aims to freeze the part of city workers’ salaries that go toward their pension until the 2019 fiscal year.
The concept is simple: Pay people less when they’re working and you pay them less in retirement. Check out this video explainer of how it all works:
In March, the city released its official financial analysis of the measure, examining its effects over the next three decades.
After the analysis came out, Prop. B supporter and mayoral candidate Carl DeMaio claimed the initiative saved “roughly $1 billion.” Prop. B opponent and mayoral candidate Bob Filner claimed it didn’t even save “a nickel.”
This is how complicated Prop. B is. Based on the same financial analysis, both sides of the initiative can credibly defend savings estimates that are $1 billion apart.
The $1 billion difference all comes down to the pensionable pay freeze. That’s the source of savings in their entirety, according to the analysis.
The initiative calls for the city to start the next five years of salary negotiations with a pensionable pay freeze as the bargaining position. But since voters can’t mandate worker salaries at the ballot box, the initiative allows the City Council to override the freeze with a two-thirds majority vote.
In short, the freeze is a strong recommendation, but it isn’t guaranteed. And City Auditor Eduardo Luna isn’t convinced it will happen. He refused to sign off on the financial analysis, warning that it could mislead voters.
The Budget
No matter how much money Prop. B eventually will or won’t save in the long haul, the analysis contends it will cost money in the short term. Current Mayor Jerry Sanders has declared the city’s budget structurally balanced, but the budget doesn’t account for the initiative’s potential costs.
We examined how both Prop. B and infrastructure repairs will affect the budget over the next five years. A hint: At first, there’s lots of red ink.
What Would Filner Do?
Filner is the only mayoral candidate to oppose Prop. B. He released an alternative pension proposal in April. Most notably, Filner wants to end six-figure pensions at least for new hires, save on retirement costs by giving smaller-than-assumed salary increases and potentially take out a $750 million loan to pay back some of the city’s pension debt. He argues his proposal will save $753 million over 15 years.
We’ve critiqued the riskiness of his plan and contend he’s overstated its savings. The loan Filner wants to take out, known as a pension obligation bond, doesn’t erase the pension debt, it just shifts it from one side of the books to the other. He’s hoping the city can make more money from the stock market than it has to pay in interest. If not, the city loses money. By issuing bonds, Filner might ease pension payments in the short term, but he’s allowing the overall debt to grow for future generations to pay.
Still if Prop. B passes, Filner said he would implement it and defend the measure in court, if necessary.
“If voters vote for something, I have to implement it,” Filner said.
The Bottom Line
Filner probably will have to implement it. Prop. B is riding high in the polls, and even its opponents don’t mince words about its chances.
“From a political standpoint, it’s pretty likely that this is going to pass in June,” labor leader Michael Zucchet said in April. “And when I say pretty likely, I mean we’re [expletive].”
The Prop. B battle, then, appears to depend less on whether it passes and more on two other issues. The first: implementation matters. The pensionable pay freeze presents just one example of the vital roles the next mayor and City Council have if it passes. The second: the courtroom. Opponents have already filed lawsuits against Prop. B and have vowed much more litigation going forward.
Liam Dillon is a news reporter for Voice of San Diego. 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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