Reform Public Pensions or Perish
Could you imagine retiring at 50 years old collecting more in retirement than you ever did while working?
That scenario is a reality in the City of San Diego — and many other cities throughout California — but only for a few privileged public employees who enjoy unbelievable and unsustainable pension benefits. Unfortunately the ramifications of gold-plated pensions are proving disastrous for the taxpayers who are left holding the bill.
As San Diego faces more than 10% unemployment higher than the national average inflation continues to drive the cost of living higher. Taxes and fees continue to increase while local infrastructure deteriorates to the point where San Diego is now ranked in the top-10 for worst road conditions in the country. Services are constantly being cut back. Libraries and fire stations have been closed and even beach bonfire pits those quintessential symbols of the carefree Southern California lifestyle were nearly torn out this summer for a lack of funding.
So where is all the money going?
Last year the City’s annual pension payment was $154 million — a huge sum of money and a whopping 42% of the City’s entire payroll. But it gets much worse over the next 15 years: By 2025 the city’s pension payment will approach $500 million dollars per year and consume over 50% of payroll. You read that right by 2025 taxpayers will be paying more each year for retired workers than those actually doing the work of the city. Common sense tells you that this system cannot possibly sustain itself.
Calls for reform were shot down for years. We were told that pension payments were untouchable and taxpayers would just have to deal with the consequences. We were told that pension reform wasn’t legal and that the best we could hope for were minor changes to the plan for future employees resulting in almost no immediate decrease to pension liabilities. We were told there was no hope.
But there is hope.
San Diegans fed up paying for outrageous pensions for public employees are taking action. Petitions are circulating and signatures are being gathered to place a revolutionary measure on next year’s primary election ballot to close the current pension system and shift all new employees into 401(k)-style retirement plans. The measure which has been thoroughly vetted by a legal team and supported by San Diego’s mayor and a coalition of reform-minded local leaders is the first pension reform plan of its kind.
For existing employees the initiative requires everyone to pay their fair share of the cost of pension benefits. Like a buyout program it also allows city employees who may be vested in the old pension system to voluntarily transfer to a defined contribution plan. This move will result in more take-home pay for city employees while saving taxpayers money.
Perhaps most importantly this plan will cap pensionable pay — the amount of compensation used to calculate lifelong pension payouts. This greatly reduces city pension liabilities and prevents pension spiking where employees add bonuses specialty pays and other sweeteners to base salaries before pension calculations.
But pension reform is not just about saving taxpayer money and fixing the city’s financial problems. It is about restoring fairness between city employees and taxpayers; taxpayers who don’t get to experience a guaranteed pension payment every month beginning at age 50 or 55.
Those kinds of benefits are unsustainable and they’re unjustifiable. San Diegans have gotten the message and they’re taking up the fight themselves utilizing the initiative process to push these reforms through at the ballot box.
As the skyrocketing costs of pensions continue to deteriorate local and state government it is time for Californians everywhere to make their voices heard and demand real and lasting pension reform.
Carl DeMaio is a San Diego City councilman. Jon Coupal is president of the Howard Jarvis Taxpayers Association.