Documents/RRSD/4: Comprehensive Pension Reform

Commitment 4: Comprehensive Pension Reform

City employees should receive a reliable retirement allowance that is no better and no worse than the average San Diego taxpayer – and city employees should assume a fair share of the risks and costs of these benefits.

Other Information:

Until the city reforms its pension liability, no tax increase will be big enough…no service cut will be deep enough…to satisfy the skyrocketing debt service on the city’s pension system. Like a bankruptcy reorganization plan, the Roadmap to Recovery is committed to restructuring and reducing our net liabilities in the pension system through reform of benefits for both existing and new city employees. The reforms outlined in this Roadmap to Recovery are designed to reduce the long-term debt service on the pension liability and bring the city’s long-term operating costs back down to sustainable levels. Specifically, the Roadmap to Reform is designed to produce a 20% reduction in the largest retirement cost faced by the city: the annual city payment for the defined benefit pension plan - and a reduction of one third of the cost of all retirement benefits. When added together with reforms to other discretionary retirement benefits, the Roadmap to Reform not only achieves savings in the FY 2012 budget – but most importantly produces hundreds of millions of dollars in savings over the next 10-15 years. All reforms outlined in this plan are legal – and have a welldocumented and proven basis for implementation. Modeling of Financial Impacts from Reforming Retirement Benefits Analysis of the impact of retiree health care comes from actuarial data provided by the Buck Consultants for the “Joint Study” conducted by the city with input from the labor unions - as well as the city’s 5-year Financial Outlook. To model the financial impacts of a variety of pension reforms, Councilmember DeMaio’s office obtained the services of a professional actuarial firm – Sheffer Consulting Actuaries, Inc. It should be noted that the pension payments utilized in the Mayor’s Five Year Outlook do not reflect the General Fund portion of the projections provided by the SDCERS actuary.1 Our office has inquired as to the methodology utilized to obtain these pension projections on numerous occasions (e.g. budget hearing questioning, committee meeting questioning, written memoranda2 and follow-up e-mail) but has not received an official explanation to date. As a result, the Roadmap to Reform uses the analysis provided by our actuary. The Five Year Outlook published in April of 2010 assumed a pay freeze in each year of the Outlook. Since we can only speculate that the pay freeze partially or wholly accounted for the variation between SDCERS and Five Year Outlook pension projections, we substitute the projections provided by our actuary for the projected pension payments in the Five Year Outlook to estimate baseline savings beginning in FY 2013.