Tackling the Pension Problem
SD's takes the lead on pension reform
(page 1 of 2)
Mayor Jerry Sanders
There is an undeniable shift happening at the foundations of San Diego government right now—one that requires a steady diet of alphabet soup. Everyone will feel the impact, but it comes buried underneath acronyms like MEA, PERB, Prop B, and DROP. What it’s really about is mountains of money.
But in the wake of the great recession, virtually every city paying retired city employees through pensions was faced with a new reality: Its pension funds, which are invested in the stock market, had taken devastating hits. In San Jose, “the funds combined lost close to $1 billion,” says Michelle McGurk, spokesperson for San Jose Mayor Chuck Reed. “And it is definitely a nationwide problem.”
That pothole you drove through for months on your way past a closed library? That’s the recession trickling down into your neighborhood. With pension payments looming, governments have stopped paying for the basics. The response in California, and nationwide, has varied.
In June, San Diegans passed Proposition B, which froze pensionable salaries and abolished pensions for new city employees. The fact that a majority of voters passed the legislation sent a clear message to lawmakers that their constituents did not want the issue of pension reform to be stalled in a political quagmire. And it set an example for other cities struggling to get bipartisan reform measures passed. What’s more—even though Prop B is held up in court right now—both candidates for mayor of San Diego promised to implement the reforms if the courts uphold them.
Experts agree San Diego is leading the nation in pension reform efforts. “San Diego is at the forefront of public pension reform,” says Carl Luna, professor of political science at San Diego Mesa College. “Cities across the country have played fast and loose with their pension obligations and have gotten behind the eight ball.”
Some cities, like San Bernardino and Stockton, are responding by declaring bankruptcy. They say their pension problems are just too overwhelming and they hope bankruptcy courts will help them reduce the debts they owe to their pension systems. “Bankruptcy causes its own problems,” Luna says. Benefits paid to employees drop, making that city less attractive to potential hires. “Then the question is: Where will you get the competent employees that you want?”