Can We Not Screw San Diego’s Public Employees Again?

A conservative scheme to build their cause by demonizing municipal employees has ended, likely costing local taxpayers tens of millions of dollars. The promised savings will now evaporate, plus  7% interest, unless you believe the people who say there will be a minimal cost. (ProTip: Don’t).

On Monday, California’s Fourth District Court of Appeal ordered the City of San Diego to financially compensate about 4,000 employees who don’t have pensions, thanks to a 2012 voter-approved measure called Proposition B. The initiative replaced pensions for new employees with 401(k) plans, shifting the burden of stock market slumps away from the city, which previously made up for losses in the pension system.

It didn’t have to end this way. All former Mayor Jerry Sanders had to do was to call a meeting and pretend to negotiate with the unions representing city workers. The fact he didn’t proves the malicious political intent underlying this pension reform measure.

[Portions of this article originally appeared in my August 6, 2018 San Diego Free Press column]

The city and labor unions negotiated changes reducing pension costs a few years prior to Prop B, and union leaders sued because the city skipped the process in 2012.

The U.S. Supreme Court let the original ruling against the city stand without comment, rejecting an appeal contending Sanders was exercising his First Amendment right of free speech.

As it stands now, Prop B remains in place. The city or its labor unions need to sue, starting a potentially lengthy legal process leading to the ballot measure being invalidated.

Keep in mind that San Diego is the only city in the state not providing traditional pensions for its employees.

From Union-Tribune coverage:

“The big fork in the road is invalidation, because without invalidation you can’t put people back into pensions because the language from Proposition B will still be in the city charter,” said Michael Zucchet, general manager of the Municipal Employees Association.

The City Council does not have the legal power to remove Proposition B from the charter. That can only be done by a court or by another citizen’s initiative or ballot measure.

Alternatively, another ballot measure can be put before voters. The problem with this approach will be achieving a political consensus, namely one promising fiscal prudence without screwing city workers.

The original measure emerged from a concurrence of political trends on the right. Pressure on the city’s bottom line caused by ever increasing pension payments gave economic conservatives an opportunity to craft a solution.

Libertarians and their fellow travelers saw an opening to weaken unions as an institution and reverse the ascension of a branch of government.

The primary selling point for Proposition B was that the City’s employee unions represented a threat to future financial stability. It should be noted it was the city, not its employees, who gave short shift to pension payments over the past few decades.

Visions of greedy union bosses swilling cocktails at the 19th hole of a luxury golf course, and lowly librarians soaking the taxpayers were the basis for selling the “only” solution to the pension crisis.

In fact, the origins of the pension crisis date back to the 1970’s, starting with local governments portion of property tax revenues after the passage of Proposition 13 shrinking by 40%. Corporations were the big winners, thanks to loopholes overlooked in the rush to cut taxes for homeowners.  

By the time the state’s temporary surplus funds to localities ran out, taxpayers were sold on the idea they were getting the same services from local government for less taxes. "Creative financing" and "cost recovery" were the tools used by localities to soften the impact, meaning that formerly free or low cost services were seen as revenue centers.

In the 1990s, the (Republican) mayor and city manager wanted to spend money but didn’t want to ask citizens for more. There was a ballpark and a political convention to pay for, and a booming stock market made it seem like the pension fund’s return on investments would mask the impact of the deliberate under-funding.

They stopped making payments needed to pay the city’s portion of the full actuarial-prescribed amount into the pension system to keep the fund growing at a pace enabling it to meet its obligations.

The employees signed off on this, thanks to promises of increased benefits. This was a deal negotiated at the highest levels, by people who should have known this was a foolish and dangerous bargain.

When the stock market collapsed, the full impact of the under-funding became known. The ensuing political crisis re-shaped the city over the next decade.

After all the investigations, resignations and recriminations it was the employees who bore the brunt of the various remedies through frozen pay, negative public sentiment, slashed benefits and more.

In 2008, employees and their unions agreed to a negotiated pension reform substantially reducing benefits and costs. According to Assemblywoman Lorena Gonzalez-Fletcher, who was then heading the local labor council, the promises made by then-Mayor Jerry Sanders included not putting a pension killing measure on the ballot.

So Sanders technically didn’t renege on the deal since Proposition B was pitched as a so-called citizens initiative. Testimony later given to the Public Employment Relations Board indicated his office directed city resources behind the scenes in support of the measure.

They got caught trying to play the system and they lost. So here we are.

Former City Councilman Carl DeMaio, who helped write Proposition B and capitalized on perceptions of overpaid bureaucrats to campaign for it, and ex-Mayor Jerry Sanders, now formally representing local business interest at the local Chamber of Commerce are among those with an interest in crafting a new measure.

Demaio saw Prop B as the launchpad for his ongoing quest to be the savior of the California Republican Party.  Sanders saw it as his legacy.

https://twitter.com/LorenaSGonzalez/status/1025425846532591616

If they chose to go through the City Council to craft a ballot measure, they’ll have to contend with Democrats who have a supermajority, the unions who were excluded the first time around, and Mayor Kevin Faulconer, whose lack of decisiveness will inevitably draw the process out longer than it needs to be.   

If they choose to go through a signature gathering route, they’ll be facing a higher bar to qualify a measure and challenged by an increasingly Democratic electorate that’s lost interest in even centrist sounding "marketplace" solutions.

And then there is the reality of the damage Prop B did to the ability of the city to provide services.  The city of San Diego auditor says the city’s workforce is down by 20% or 2,300 workers.

From 10 News:

Michael Zucchet, who heads the Municipal Employees Association, says the city is losing workers to other agencies in this county and others because they offer better pay and retirement benefits, such as a pension. He says the problem has gotten worse since the unemployment rate has dropped to a near-historic low 3.5 percent.

The city in 2012 switched most new employees to a 401(k) style retirement plan after voters passed Proposition B. That proposition is now in legal limbo after the California Supreme Court said the city skipped a key step in the approval process.

"The City of San Diego is hemorrhaging employees to other jurisdictions," Zucchet said. "We have documented people who have been city employees for a long time, have no interest in leaving, but they can't pass up a 20-30 percent pay raise in Chula Vista, Carlsbad, National City and these other places."

There is a fair deal for San Diego’s Public Employees and the taxpayers out there, and it will take are some honest negotiations, sans Carl DeMaio and his wrecking crew.

Time is of the essence here. Everybody will lose when the Trumpian sugar rush ends on the stock market as the cost of making this right will escalate dramatically.

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Email me at DougPorter@WordsAndDeedsBlog.com