Sanders proposes eliminating city pensions

New employees would get 401(k) accounts; current workers not affected

By Craig Gustafson
Friday, November 19, 2010 at 9:58 a.m.

If San Diego Mayor Jerry Sanders has his way, the pensions that city workers collect — and which led to much public angst over the past decade — will no longer exist for most new hires.

Sanders said Friday he'll gather signatures to put a measure before voters that would eliminate guaranteed pensions for all future employees, excluding police officers and firefighters, and replace them with 401(k) accounts similar to what many private-sector workers receive. Pensions would not change for retired or existing employees.

"I heard the voters loud and clear. They want definitive solutions to our pension problems," Sanders said. "While the solution I'm about to propose will not in the near term solve our budget problems, it will ensure we never end up here again."

The next scheduled election is in June 2012, but it could appear on an earlier ballot if the state calls a special election next year.

The mayor’s plan comes after the resounding defeat of Proposition D, a Nov. 2 ballot measure that would have increased the city’s sales tax to solve a budget crisis. Sanders also promised to move forward with the 10 changes to city operations and pensions that were tied to Proposition D as part of his fiscal recovery plan.

In addition, Sanders said he will rethink how city government operates by exploring how to merge certain departments and possibly allow private companies to run city-owned golf courses and airports.

All aspects of the plan -- besides the public vote -- would require five votes from the City Council.

The city has a $73 million budget deficit for the fiscal year that begins July 1. The gap is expected to continue to grow as the city’s pension payments balloon each year and gobble up more and more of the $1.1 billion operating budget.

As part of Proposition D, the city was supposed to create a 401(k) option for its workers. The option was viewed as a way to entice younger workers and new hires to forego a guaranteed pension because they would prefer more take-home pay or they may be unsure if they’ll work for the city for 10 years, the required vesting period. It’s not likely that older workers would choose a 401(k) unless the city match — a perk that would have to be negotiated between the city and labor unions — is generous.

Now Sanders wants the 401(k) to be the only retirement plan available to new hires. The city would benefit financially in the short- and long-term because all the city’s costs would be paid upfront. The worker would have sole responsibility for managing the money and take the financial risk.

Right now, under the current pension model, the city bears all the financial risk.

There have been no shortage of ideas out of City Hall since Proposition D was shot down by 62 percent of city voters. Councilman Carl DeMaio has proposed cutting employee pay and eliminating retiree health care. Former City Attorney Michael Aguirre is urging the city to file for bankruptcy to eliminate some of its $2.1 billion in pension debt.

http://www.signonsandiego.com/news/2010 ... -pensions/