Should city employees have to pay more into their retirement system to help make up for its investment losses and accounting changes?
San Diego City Attorney Jan Goldsmith says that's the law. If he's right, it eventually could save the city many millions of dollars in a bear market.
Acting on suggestions from two blue-ribbon citizens commissions, Golding has gotten legal opinions that say the San Diego City Employees Retirement System (SDCERS) is the city's "substantially equal partner" in both good times and bad, and thus its active members should kick in half of a big chunk the city owes the system next fiscal year.
And maybe downstream, in bull markets?
"If they make a 25 percent return on their money -- SDCERS -- this year, congratulations to all of us: the city and our 'substantially equal partner'," Goldsmith said in an interview Tuesday. "This isn't about sticking it to anybody. It's about enforcing the law."
Actuarial accountants say the city needs to pay SDCERS about $230 million toward the system's $1.4 billion deficit for the year starting July 1. More than a third of that amount -- $80 million -- represents the system's investment losses during the last fiscal year and changes in "actuarial assumptions."
Goldsmith's lawyers have dug up a legal opinion from the deputy city attorney who drafted a city charter change in the early 1950s that made the city and SDCERS equal contributors to pension obligations. A pension expert with K&L Gates, a leading worldwide law firm, backs that assessment, as do local taxpayer advocates.
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"Right now, taxpayers are paying an unfair share for public pensions," said Lani Lutar, president and CEO of the San Diego County Taxpayers Association. "This decision, if upheld by the courts, means that employees would have to contribute more."
Added Lutar: "When there were huge investment gains, instead of money going into into the system and reducing the unfunded liability, what we saw was that benefits were granted -- and these were excessive benefits that were awarded during the best of times."
Asked what recourse Goldsmith might seek, if SDCERS rejects the "equal partners" analysis, the city attorney replied: "I'll have to consult with my client, the city of San Diego. And there are many options that could be had. I'm not going to discuss what those options are."
So far, officials at SDCERS have not responded to a request for comment on the issue.
Spokesmen for unions representing about 80 percent of the city's 9,000 classified employees said they don't expect SDCERS to accept Goldsmith's analysis but that they are, in general, "monitoring" the situation with "concern" about future labor relations.
