Despite the findings of Voice of San Diego’s Fact Check, the statement made by Kevin Faulconer’s campaign that pension reform is “saving a billion dollars we can now put back into our communities” is mostly untrue.
The Oxford English Dictionary defines savings as: The accumulation of wealth by economizing on expenditure of money or by setting aside (esp. on a regular basis) a portion of one’s income for this purpose.
Under this definition, there are no savings because there is no accumulation. There is no money set aside. The salary freeze is only “projected to save nearly a billion over 30 years.”
The statement is mostly untrue because there are no savings “now” that can be spent on our neighborhoods. Projecting to save is a materially different concept than having savings we can “now” put back into our communities. Faulconer already admitted during our debate Thursday that his plan is to spend borrowed money, not saved money.
Further, as Voice of San Diego reported recently: “The extra funds the city’s next mayor might have expected to come next year appear increasingly unlikely to materialize.” This is because the pension board will likely lower the assumed rate of return to 7.25 percent.
It should be closer to 4 percent, according to Stanford researchers, which would significantly increase pension costs.
Further, attributing savings to a pay freeze is problematic, as the pension actuary noted: “[W]e would caution that the expected impact of a complete pay freeze is likely to overstate the actual savings that will occur, but by how much is not something we can quantify with the information currently available.”
How can the Faulconer campaign do with certainty what the pension actuary cannot do?
Additionally, while less money may be needed for pensions, the fact remains pension costs are projected to go up, even under the salary freeze.
Finally, it is my understanding that the city paid salary increases to get the freeze. The fiscal year 2014 salary and wages amount to $679,628,950, which is $6 million more than fiscal year 2013’s $673,976,786. These salary increases would have to be deducted from any “savings.”
It is upon these premises that the claim – under former Mayor Jerry Sanders’ pension reform, the city is “saving a billion dollars we can now put back into our communities,” – is mostly untrue.
Mike Aguirre is the former city attorney and a current candidate for mayor. Aguirre’s commentary has been edited for clarity. See anything in there we should fact check? Tell us what to check out here. Want to respond? Submit a commentary.