The city of San Diego will be offering retroactive defined benefit (DB) pension benefits to thousands of city employees who were previously only offered defined contribution (DC) plans.
The decision comes after the California Supreme Court overturned 2012’s Proposition B, a law that was passed after being voted on by the public. Proposition B shifted all city employees except police officers away from pensions to DC plans. The law was in effect from July 2012 through July 2021.
Proposition B was controversial and was ultimately deemed to have been illegally placed on the public ballot. The total amount of funds owed to city employees will be approximately $73 million in retroactive pension accruements. The payments will go to approximately 3,850 workers who began working for the city after July 2012.
A new analysis shows the city of San Diego’s pension system is in strong financial shape compared to similar systems across the state and the nation.
While the city’s pension debt is nearly $3 billion, most pension systems face similar gaps between their investment assets and long-term projections of what they will owe employees when those employees eventually retire.
The comparative analysis, which was presented to the city’s pension board Friday, shows that San Diego has been in the top half of the nation’s largest 175 pension systems for “funded ratio” every year since 2013.
And the city’s ratio, which just climbed from 70.2 percent to 74.3 percent thanks to the robust stock market, has been in the top quarter of those national pension systems several times in recent years.
The city’s pension system, formally known as the San Diego City Employees Retirement System, also has among the most conservative policies regarding projections of long-term investment returns.
San Diego’s projected rate of long-term investment growth is 6.5 percent, which is at the very low end of the group of 175 pension systems.
Almost all of that is in the required contribution the city must make to its pension system. Yes, San Diego politics will always somehow find a way back to pensions. Pensions and Mark Fabiani.
Nick Serrano, the mayor’s deputy chief of staff, even clapped back at a critic who accused the mayor of giving more money to the police department while making cuts elsewhere.
“Because the City has a pension obligation we have to fulfill. The increase to the police budget is the City’s pension payment — it’s not a service level increase. Nice try,” Serrano wrote on Twitter.
The pension spike: This year, the city is grappling with a $49.3 million increase in its pension payment. To the extent pensions matter as a civic issue it’s in this: the payments. That amount of money can pay for a lot of things – parks, rec centers, libraries, firefighters and cops, etc.
About $36.8 million of the increase is tapping the city’s general fund, and police make up 42 percent of the general fund. Here’s how pension increases have affected the police department’s budget over the last five years:
San Diego’s annual pension payment will rise by nearly $50 million this June, making it much harder for the tourism-reliant city to balance its budget while tax revenues continue their sharp slide due to the COVID-19 pandemic.
The city’s pension board is requiring a $49.3 million spike in the annual pension payment — from $365.6 million a year to $414.9 million — because estimates of long-term pension debt rose this year from just over $3 billion to $3.34 billion.