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San Diego: Pandas, Padres and pension problems

July 18, 2010 |  7:44 pm

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To tourists, San Diego is a mecca. To denizens of the Los Angeles Basin, it's their favorite weekend getaway.

But to government wonks, San Diego is ground-zero for the growing national debate about whether taxpayers can -- or should -- continue to provide the pensions and retiree health benefits that public employees were promised during more prosperous (and more confident) times.

After years of litigating, negotiating and arguing, the city still has a $2.2-billion unfunded pension liability and a $1.3-billion unfunded liability for retiree health benefits, according to a recent grand jury report. Progress toward whittling down those numbers was largely wiped out by the real estate bust and global recession.

Pension payments could gobble up half the city's annual budget in 15 years, the grand jury said. In other regions, talk of pension reform is something that pops up at budget season and then recedes. In San Diego, it's year-round. The editorial page of the San Diego Union-Tribune acts as the command-and-control center for the forces demanding that pensions be reduced.

Take last month:

+The grand jury suggested the city may need to file for bankruptcy (an idea dismissed by the city attorney, who says no legal precedent exists for reducing pension obligations that way).

+City Atty. Jan Goldsmith launched a lawsuit to whittle down the city’s share of pension fund payments based on a half-century-old legal opinion found gathering dust in the files.

+The taxpayers association released a report showing city pensions are better than military pensions.

+ A City Council member began a petition drive to qualify a ballot measure to outsource as many city jobs as possible so that city employees can be fired and replaced by cheaper private-sector workers. (The drive flopped but he promised to renew his efforts).

“City employees feel under assault,” said Bill Craig, 55, a city employee for 28 years, now an associate land surveyor at the city landfill.

And around and around it goes in San Diego: with employees fighting to save their pensions and benefits; residents unwilling to pay higher taxes; the libertarian-themed San Diego media ever vigilant; and elected officials trying to keep the city government afloat without angering anyone or endangering their political futures.

Jay M. Goldstone, the city’s chief operating officer, admits being flummoxed by San Diego’s political culture and its resistance to change. He’s a relative newcomer, having worked in Pasadena before being hired by Mayor Jerry Sanders.

“I call San Diego the anti-Reno,” Goldstone said. “Reno calls itself ‘the biggest little city’ in the world. San Diego is the ‘littlest big city.’ It has a very small-town mentality.”

With contracts, seniority protection and political clout, city employees are resistant to the idea of sacrificing their families’ futures to help bail out a city whose residents seem to believe good city services at bargain prices are a birth-right and where the politicians are afraid to oppose the anti-tax zeitgeist.

Attempts to end-run employee contracts and vested pension benefits through litigation have largely flopped. So has outsourcing.

The city’s pension deficit stems from decisions in 1996, 2000 and 2002 by the City Council to increase pensions while simultaneously decreasing the amount the city pays into the pension fund -- banking on a rising stock market to make up the difference.

When the market tanked and the value of the pension fund’s investments declined, the deficit ballooned. What made San Diego the poster child for pension problems was not necessarily the deficit; lots of city and county governments have pension deficits.

What made San Diego different was that it failed to acknowledge that deficit in proposed bond offerings in 2004. When that deliberate omission by city officials was discovered, it set off a Securities and Exchange Commission investigation, a sharp decline in the city’s bond rating and a hunt by prosecutors for the malefactors.

The city’s preening self-description as America’s Finest City and its reputation for fiscal conservatism made the story of its financial woes too delicious for the national press to ignore. In 2005 the mayor, Dick Murphy, was driven to resign amid criticism that he was too slow to recognize the pension deficit problem.

Adding to the city employees' sense of being unfairly attacked were failed attempts by the U.S. attorney and the district attorney to prosecute former pension board members who voted to increase pensions. In both cases, the allegations were dismissed by judges who said they were based on flimsy evidence and oddball interpretations of the law.

Sanders, elected in 2005 and easily reelected in 2008, soldiers on, talking confidently of plans for a new downtown library, a new city hall and an expanded convention center and announcing a major program to fix pothole-beset streets using bond funds.

His middle-of-the-road approach has brought criticism from opposing sides of the pension dispute -- employees who believe he has betrayed them, and the impatient “just fix it" lobby that wants a more robust approach, possibly including bankruptcy, massive layoffs, and outsourcing.

Without a new source of revenue flowing to City Hall, the Sanders’ approach has been to trim, cut and squeeze the budget and wrestle city employees into new contracts and lower pensions for new hires.

Some 1,400 positions have been cut but most were empty; only about 200 employees have been laid off. The idea of a sales tax boost was floated this month but quickly abandoned.

Service cuts have been mostly niche: reduction in library hours, closure of neighborhood community service offices and the sale of the Police Department’s horses. Fire pits at city beaches were saved through private contributions.

Firefighter overtime has been trimmed, leading to some stations being unmanned during certain hours. And the city continues to have fewer police officers per capita than any big-city in the country, although the crime rate continues to plummet.

Sanders has promised a more comprehensive plan some time soon. Mayoral staffers believe the false hope of bankruptcy sweeping away the city’s financial problems may have made San Diego residents even more reluctant than usual to think about paying higher taxes. Not so, say the critics.

“Bankruptcy hangs around as an issue because the mayor has failed to put forth any comprehensive  plan on how to solve the city’s financial problem,” said Andrew Donohue, editor of www.voiceofsandiego.com, an Internet news organization established in 2005 with the goal of riding herd on City Hall finances.

For a look at San Diego’s pension-go-round, and the national debate over pension reform, look here: http://www.latimes.com/news/local/la-me-pensions-20100719,0,898989.story

-- Tony Perry in San Diego

Photo: A rider aboard the ferry on San Diego Bay admires the city skyline in the morning. Credit: Don Bartletti / Los Angeles Times

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