San Diego

Cuts to City Employee Pensions Could Cost San Diego Millions

If an appellate court upholds the ruling that the city's 2012 pension reform is illegal, untangling the changes could cost anywhere between $20 million to $100 million, according to recent estimates.

According to the San Diego Union-Tribune, those estimates are based on wide ranging variables.

Critics of the measure say the estimates don't include many of the unseen costs of the attempted pension reform, which include hiring and retention issues and loss of training dollars.

Backers say the city risks bankruptcy if pension reform is not implemented in some form.

In 2012, voters overwhelmingly approved a ballot measure that provided new retirement benefits for new workers. Instead of the city paying a defined benefit, employees would invest in retirement accounts, which fluctuate with the markets.

About 2,000 employees have been hired with the new 401k-style retirement plan since 2012, when the measure took effect.

A lower court ruled the measure, Proposition B, was illegal and a state labor board ordered the city to "make the employees whole again," meaning move everyone back over to pensions. The state board, authorized by the court to decide on a remedy, also ordered the city to pay back interest to the new employees and a seven percent penalty.

Backers of Proposition B are undiscouraged.

"Labor union bosses are foolishly cutting off their nose to spite their face," said former City Councilman Carl DeMaio, who wrote Prop B. "They're going to lose in court, and if by some miracle, they're able to bamboozle judges into overturning the will of the voters, we ultimately will get reform once again at the ballot box."

The city hired a firm to study how much it will cost to retroactively create pensions, according to the San Diego Union Tribune's David Garrick.

That estimate was $20 million, but about a year has passed since then and the city has hired more people.

Questions remain over what would be done with the 401k's, which the city has been contributing to at a rate of 9 to 11 percent. Tax laws say the funds can't be touched without a penalty.

Labor unions suing the city estimate the city owes them a $100 million.

"If you thought Prop B was strong reform, overturn the will of the voters and wait until you see the son of Prop B," DeMaio said, vowing to continue the fight to reform pension costs.

James Diaz is a San Diego firefighter hired under Prop B. He told NBC 7 if proponents of Prop B pursue further action against their retirement benefits, he believes it would only compound other negative impacts and costs of the measure.

"We’re losing good people," Diaz said, referring to the city's hiring and retention issues.

Diaz said more than 30 firefighters are leaving the city in the next eight months, and he said the highest caliber candidates are seeking employment in cities with pensions and death benefits.

Because of Prop B, firefighters hired after 2012 still do not have a defined death and disability benefit, and fighting fires is dangerous work.

"We really only have a (verbal) promise that we would be taken care of if something happens to me," Diaz said.

San Diego is the only city in the nation without a defined death benefit for its firefighters, and the only city in the state that does not provide pensions to their first responders.

Diaz said the city is also losing training dollars as firefighters continue to look for work in cities with better benefits. Beyond the inherent danger, running the high call volume in San Diego also takes its toll on his and his colleagues' health.

"We take a lot of pride in our work. We’re a tight knit group and we love working together and we absolutely love to serve the public," Diaz said. "But people are starting to just choose not to work here."

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