City's 401(k) Pension Reform a Numbers Crunch

The numbers behind San Diego's proposed pension reform initiative are now on the table.

And opponents are attacking them as being based on assumptions that are illegal or illogical.

This hot-button measure aimed at the June 2012 ballot figures into the race for mayor, and is being closely watched by other California cities deep in pension debt.

Hostilities already are being vented outside supermarkets and big-box stores.

Signature gatherers for the initiative petitions are being accused of misrepresenting the measure. They say they're being harassed by opponents.

"Will you pack up and go away?" a city labor union representative demanded, as he challenged a petition signature-gatherer outside the Loew's outlet in Mission Valley on Thursday. "

"Will you pack up and go away, or tell the people who signed today the truth? Will you call them back and say 'Hey, I misrepresented the truth?"

"I'm not misrepresenting!" the signature gatherer shot back. "Let me explain."

Whatever the truth, the actuarial numbers are now gaslighting the debate over putting all new city hires except police recruits into 401(k)-style retirement plans, instead of traditional pensions.

Conservative and business interests are for it, saying it'll save the city at least a $1 billion -- and maybe upwards of $2 billion -- in city retirement costs over nearly three decades.

Progressive and labor interests are against it, saying those projections are based on a 5-year salary freeze that violates collective bargaining statutes.

"We are confident that our initiative is legally defensible," says Lani Lutar, president of the San Diego County Taxpayers Assn., a major backer of the Comprehensive Pension Reform for San Diego campaign. "And of course there's a lot of speculation among the opponents. But the opponents don't want the initiative to pass."

Organized labor groups say it's a court case waiting to happen,should it pass.

"But even if you use their numbers," says Lorena Gonzalez, secretary of the San Diego-Imperial Counties Labor Council, "its' going to be a hit of over $90 million in the first few years. And then after 27 years, the cost savings for that 401(k) begin to decline as well ...

"So first of all they're using Enron accounting to come up with these figures. Then they're not providing for Social Security. They're not even sure they can get back into Social Security. So the costs that they're attributing to their 401(k) are really unclear."

This retort, from Lutar: "What you're doing is, you have a shorter amortization period, so you're paying down your debt faster. So it's the equivalent of paying your credit card debt down faster, because of this new system. It doesn't mean you have increased costs ...

"Our fiscal estimate does account for that cost, should the city want to enter into Social Security again.The initiative caps the cost that the employer can contribute to 9.2 percent."

The outcome of the measure is being cast as a 'market signal' for other California cities saddled with huge pension debt.

If it passes and survives legal challenges, others may follow with their own.

But Fire Fighters Local 145 President Frank De Clerq, an opponent of the measure, offers this view:

"States like Alaska and Colorado that went to a defined contribution plan are now going back to a defined benefit plan. So as we do the research and people look around this country, it's not the telltale answer."
 

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