San Diego Sues its Pension System to Shift Responsibility for Deficit from Taxpayers to the Employees

San Diego's pension plan has a $2 billion deficit. To help fill the deficit the city plans to shift responsibility for some of the gap to the employees.

In a unanimous vote, San Diego Sues Its Pension System

The city of San Diego is suing its retirement system in a dispute regarding how much financial responsibility, if any, city workers should bear for a pension deficit topping $2 billion.

If successful, the lawsuit could lead to city workers helping pay for the pension fund’s investment losses rather than the current practice of having taxpayers make up for any deficiencies. The potential taxpayer savings have been estimated at $40 million for the fiscal year that begins July 1.

The lawsuit is based on City Attorney Jan Goldsmith’s interpretation of the city charter. He says that document, essentially a city constitution, states that the city and its employees shall contribute “substantially equal” amounts to pension obligations each year.

The City Council unanimously approved the lawsuit in closed session last week, and Goldsmith filed it Monday in Superior Court.

He is asking Judge Joan Lewis to force the San Diego City Employees’ Retirement System to increase employee contribution rates so workers will pay what he says is their fair share of $80 million. That is the portion of this year’s $232 million city pension payment that Goldsmith estimates can be attributed to investment losses.

Councilman Carl DeMaio, an advocate for pension changes, said the potential for increased contributions from workers — and, in turn, less take-home pay — could push unions to the bargaining table and lead to benefit reductions that lessen the burden for taxpayers.

“We’ve been pursuing pension reform from a number of angles, and I don’t believe that you ever are going to find a silver bullet to undo the city’s pension mess, but this is one of the arrows in the quiver,” he said of the lawsuit.

The judge is expected to rule on the issue before the city makes its annual pension payment July 1.

Taxpayers are fed up and this unanimous vote shows the San Diego city council has gotten the message. Three cheers for the city of San Diego for this move. The next thing the city ought to do is start outsourcing work and firing city employees including the fire department.

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com
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