Faulconer Statement on Pension Fund Investment Losses
Underscores importance of fully implementing voter approved pension reform measure that will save taxpayers nearly $1 billion
SAN DIEGO — Councilmember Kevin L. Faulconer released the following statement today regarding the San Diego City Employees Retirement System (SDCERS) actuarial valuation for fiscal year 2012.
“San Diego voters overwhelmingly approved Proposition B to end the broken pension system and usher in an affordable and fair government employee retirement plan,” said Councilmember Kevin Faulconer, co-author of the proposition. “The facts are clear. Comprehensive pension reform will save taxpayers nearly $1 billion.”
A 2012 report by the Independent Budget Analyst projected moving most new City employees to a 401(k)-style retirement system and capping existing employee’s base pay for five years will produce $950 million in savings over the next three decades. Proposition B was approved in June 2012 with over 60 percent of the vote.
The SDCERS report states the City’s pension payment increased in part due to $8.3 million in pension fund investment losses. Once Proposition B is fully implemented, San Diego taxpayers will no longer be responsible for such massive and unexpected pension payments.
“By approving Prop B, San Diegans told City Hall they want the pension debt to be paid down faster. We must implement the will of the voters and continue fiscal discipline to ensure savings can be reinvested in San Diego neighborhoods.”
For Immediate Release: January 11, 2013
Contact: Matt Awbrey, Communications Director – (619) 929-0089
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Matt Awbrey is Communications Director for Council President Pro Tem Kevin Faulconer.
Comments 11
“moving most new City employees to a 401(k)-style retirement system and capping existing employee’s base pay for five years will produce $950 million in savings over the next three decades.”
The savings come from the five-year pay freeze. The move to a 401(k) provides certainty of cost but no guarantee of saving the City any money.
Hypocrisy, what IS guaranteed by switching to a 401k plan is NO FUTURE UNFUNDED LIABILITY. And that, my friend, is HUGE. The only real uncertainty is how BIG that unfunded liability would grow to.
Stated differently,once a defined benefit pension plan is in place (regardless of limitations), INVARIABLY future politicians decide to expand the benefits (usually retroactively) to satisfy rapacious labor union demands.
It happens EVERY time. EVERY city, county and special district in California — not to mention state pension plans — has such unfunded liabilities for this reason.
And yet, here you are Hypocrisy, saying we should continue this DB madness. One would suspect that you are a (gasp!) self-interested government employee, or paid labor union flunky. But we honor your anonymity, which — come to think of it — actually tells us all we need to know about your self-interest in this matter.
Richard,
Actually I don’t disagree with anything you wrote. A 401-K gives certainty to the City and politicians have shown that they are probably not to be trusted with the responsibility of a pension plan. All I was pointing out is that there are no guaranteed savings and in fact there is some guaranteed cost involved in the switch from a pension to a 401-K.
For the reasons you mentioned, the change was probably necessary for and beneficial to the City, but at least on this blog I hope we can be intellectually honest when discussing important issues.
Hypocrisy, here’s “intellectual honesty”:
EVERY government DB pension plan is underfunded. And not just in CA. And not just in the U.S. It is a WORLDWIDE problem. It almost NEVER works — except, of course, for government employees.
I have to say “almost” because surely SOMEWHERE such a plan is fully funded with no unfunded liabilities. Kind of like an infinite number of monkeys and an infinite number of typewriters . . . .
Given that every such govt DB plan has resulted or will result in massive taxpayer costs from underfunding, is it not intellectually honest to assume that any San Diego DB plan (new or existing) will experience the same result — huge “unanticipated” future cost?
Hence we can intellectually conclude that a govt 401k plan with its certainty of cost (replacing the “normal’ DB option) will over time save the taxpayers considerable amounts vs. a DB pension. At least on THIS planet.
Richard,
You are correct, if, of course you assume that the government (taxpayers) isn’t going to take care of all those retirees who didn’t do a good job of managing their 401-K. Are you willing to make that assumption?
NO ONE can predict the future — not even you, Hypocrisy.
Yet you predict that somehow all these underfunded government pensions (plus SS, Medicare, veterans’ pensions, retiree health care, SSI, FDIC and on, and on, and on) will somehow be magically paid, regardless of cost. Who by or how is a mystery. Indeed, an impossibility.
I can’t imagine a more absurd assumption — or a more harmful one. Promises that people rely on that simply cannot be kept.
You win the absurd assumption contest, hands down!!
Richard,
What I assumed and you conveniently refused to address is that, some years down the road, the effect of not having guaranteed pensions is going to lead to many retirees not being able to make ends meet. Being the compassionate society we are, the taxpayers will still be stuck with the bill for those who didn’t manage their 401-K’s.
Either way, there will be a huge bill coming due in the next 20-40 years and beyond. The solution is not to make retirement into a gamble. The solution is to put safeguards into effect to protect pensions. If you are honest, you will note that every underfunded pension has two ingredients in common – Intentionally underfunding during stock market booms and the awarding of RETROACTIVE benefit increases that were never paid for. Do you really believe it will be more difficult to avoid repeating those mistakes than it would be to ensure that everyone has retirement security one person’s investments at a time?
Hypocrisy, my unqualifed answer to your question is YES!!!!!!!!!!!!!!
If you were honest, how could you think otherwise?
With THOUSANDS of “guaranteed” (DB) government pension plans worldwide, it’s likely you cannot cite a SINGLE such plan that is not underfunded — facing future (if not present) additional payments by hapless taxpayers — with no limit as to what those payments will be. Where’s your example of Utopia government pensions (one that is sustainable into the future)?
Whatever Utopian safeguards you envision can be bypassed by clever politicians pressured by rapacious public employee labor unions. They always have been, and will be — IF politicians somehow can promise future benefit improvements with little or no additional cost today.
You seek a Utopian solution that does not exist, and indeed is a proven failure. You want government to assure that all have an adequate, comfortable retirement — regardless of the individual’s personal spending or investing proclivities — and regardless of government’s ability deliver on such promises.
Actually, your solution is in place today — it’s called “Social Security.” How’s that “social contract” plan working out for ya? More important, how’s it working out for your grandchildren?
Think puttting government workers under SS is the solution? Think govt workers WANT that solution?
Hint: Given the one-time option of continuing their SS “solution,” only three cities in the county chose to keep SS — and I suspect the workers in those three cities are now regretting it. And BTW, those three cities cover ONLY the “general” employees with SS — no police or ff’s pay SS on their govt wages and overtime.
My Goodness, Hypocrisy – no WONDER you post anonymously!
What I am amazed about is the focus and high concern about government employee benefits and pensions rather than the livelyhoods of the taxpayers. Out in the real world. Im consering justifying a denial in cost of living raises to my employees by thelling them high taxes that would go to that cost of living raise is now going to upgrade government services. I type this while I’ve been waiting for an hour to get my drivers license renewed at the dmv.
Joe (and everyone else), a helpful hint: In an odd way, we’ve partially privatized the CA DMV. You can now get several of the DMV services done at AAA offices with far less pain and discourteous service. Consider checking with them next time.
Mr Rider
You are right about privatizing government services and creating competition. The success of UPS, FEDEX and the failure of USPS is a good example. I went to the DMV while my car was getting tires across the street. It just had me thinking. If Discount told me they were raising the price on tires and I didn’t see an improvement in service. I’d go somewhere else. Do all these tax hikes that pay for public employee pay raises and benefits really improve the quality of government services?