NCPA - National Center for Policy Analysis

San Diego's Tough-Love Pension Proposal

January 4, 2011

After San Diego voters rejected a budget-balancing half-cent sales tax increase, Mayor Jerry Sanders unveiled what he calls a radical idea: He'll ask voters to eliminate the city's traditional defined-benefit pension plans for new employees, offering them 401(k)-like savings accounts instead, says Christopher Palmeri.

  • Defined-contribution plans such as 401(k)s, where employees bear the risk of poor investments, are a rarity in the public sector.
  • Only 17 percent of government workers have such accounts, about one-third the number in the private sector.

Even after closing a $179 million deficit this year, San Diego faces a $72 million budget gap for the fiscal year beginning July 1 and has a $2.1 billion unfunded pension liability.  The city has trimmed costs by eliminating 1,400 of its 11,000 employee positions, closing some public restrooms at the beach and ending police horse patrols in scenic Balboa Park.  Sanders says his proposal will save the city money, though he doesn't have an estimate yet.

Some criticize Sanders for excluding police and firefighters from the 401(k)-like plans on grounds that it'll hurt recruitment, says Palmeri.

  • After 26 years as a police officer, he collects a $90,000 city pension on top of his $94,000 mayoral salary.
  • "He's the ultimate double-dipper," says Steven Kreisberg, director of collective bargaining at the American Federation of State, County, and Municipal Employees.

Source: Christopher Palmeri, "San Diego's Tough-Love Pension Proposal," BusinessWeek, December 9, 2010.

For text:

http://www.businessweek.com/magazine/content/10_51/b4208034684126.htm

 

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