City Sues State Over Pension Law

Overturning Prop. B may cost taxpayers, city attorney says

The city is at odds with California over a new state law that clashes with San Diego’s recently-passed pension reform measure, Proposition B.

On Thursday, City Attorney Jan Goldsmith announced an unprecidented lawsuit that would repeal AB 1248, a new state law he said extends beyond the state’s reach by forcing local workers to enroll in Social Security.

The voter-approved Prop. B transitions new city hires except for police officers, from a pension plan to a 401(k)-style plan and promises to negotiate a five-year pay freeze.

AB 1248 requires that employees enroll in Social Security. Prop. B gives city workers a choice between a 401(k) and Social Security, but gives the city and its labor union the power to negotiate the two options.

The issues date back to 1981 when city workers agreed to drop out of Social Security to accept qualified "defined benefit" retirement plans.

Over the years, sweeteners were added, pension system payments were skipped, a $2 billion deficit arose, and the city's credit on Wall Street temporarily dried up.

Click here for a timeline of Prop. B’s litigious history.

Going back to those benefits could cost taxpayers, Goldsmith said.

Goldsmith held a news conference Thursday to explain the lawsuit that he said has the blessing of city union members. He said the law is unconstitutional because California law gives city Charters authority over their employees’ compensation – not the state.

"It's all about local control," Goldsmith said. "And the right of our city to sit down with our labor unions and negotiate the terms and conditions of employment. And we can't back off this. And we will not."

In addition to the city’s concerns over the expenses to taxpayers, the Municipal Employees Association and Fire Fighters Local 145 say that if Prop. B is overturned in court, their new members may be stuck in Social Security with no escape hatch.

Labor attorney Fern M. Steiner wrote in a letter of support on behalf of Local 145 that the union “shares the City’s view that AB 1248 exceeds the lawful authority of the State Legislature.”

The City Attorney's office does not have an estimate on how much the lawsuit will cost, but said the lawsuit will be handled in-house, so the only expenses will be staff time.

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