September 21, 2010
CONTACT: Lani Lutar
619-234-6423 or lani@sdcta.org
Study Concludes: Premature for San Diego Cities to Declare “Mission Accomplished” on Pension Reform
Savings could fund critically needed services without raising taxes
(San Diego) – In a report released today by the San Diego County Taxpayers Association (SDCTA), the Association concludes more effort needs to be made in achieving pension cost reductions by many cities. This effort is vital and must be made a priority, as savings achieved could be used to provide for critically needed services without raising taxes or fees.
The report, “Phase I Update: San Diego Pension Plans,” examines the pension costs and benefits for the San Diego region’s 17 cities enrolled in the CalPERS since the Association’s initial review in the fall of 2009. In addition, the report evaluates the growth in pension costs since 1999.
Among the key findings in the report:
- Five cities in the region have established a second, reduced pension formula for new employees: Carlsbad, El Cajon, La Mesa, National City, and Solana Beach. Prior to SDCTA’s initial report, no city had a reduced pension formula for new hires.
- Ten cities in the region have reduced or eliminated the amount of pension costs they have picked up (contributed) on behalf of employees.
- Over the past five years, 14 of the 17 cities reviewed have experienced pension cost growth rates that have far exceeded General Fund revenue growth.
- Based on the years reviewed, the City of San Marcos had the highest pension cost growth of any city in the region participating in CalPERS (578%).
- The only city to make the annual “Top Five” pension costs to general fund ratios over the period FY 1999 to FY 2009 was the City of Chula Vista. Several other cities are “repeat offenders” including National City, Escondido, La Mesa, El Cajon, Oceanside, and Vista.
In addition to CalPERS benefits, SDCTA learned that some cities (such as Poway and Del Mar) offer added retirement benefits such as Social Security, deferred compensation plans, defined contribution plans (similar to 401(K)s) and supplemental retirement plans that can increase the annual retirement payout employees receive.
Last year, SDCTA issued formal pension reform recommendations for the 17 cities in the County of San Diego participating in CalPERS. They include:
- All employees should pay their fair share of pension costs, between 7% and 9% of payroll.
- Salaries should NOT be increased to offset increased pension contributions by employees.
- A second, lower tier retirement formula should be created for new hires.
- To reduce costs, cities should begin paying off their unfunded pension liabilities as soon as possible.
In the year since the original report was published, several cities have taken action to adopt many of the SDCTA’s recommendations.
“While no city has yet adopted all of the SDCTA’s recommendations, there has been significant progress in adopting pension reforms among many of the cities in San Diego County,” said Lani Lutar, SDCTA President & CEO. “Our analysis reconfirms what our initial 2009 report found: modest, sensible measures make a huge difference to the taxpayers.
“The Association applauds all of the elected officials and city management staff who have shown leadership in recognizing a need to make these changes. We encourage cities to continue these efforts until pension benefits get to a sustainable level.”
“Some city officials have prematurely declared ‘mission accomplished’ on pension reform after only partially addressing the problem. It should be made clear that until the system is sustainable, they’ve got a long way to go,” added Lutar.
A copy of SDCTA’s pension reform recommendations and regional pension study and link to the San Diego region’s $100K Pension Club can be downloaded at www.sdcta.org.
The San Diego County Taxpayers Association is a non-profit, non-partisan organization, dedicated to promoting accountable, cost-effective and efficient government and opposing unnecessary new taxes and fees. Founded in 1945, SDCTA has spent the past 65 years saving the region’s taxpayers millions of dollars, as well as generating information to help educate the public.