CA: Aguirre memo urges major pension benefit rollbacks (San Diego)

San Diego Union -Tribune ^ | 1/11/05 | Phillip J. LaVelle

[NormsRevenge]

In a memo distributed in the run-up to Mayor Dick Murphy's State of the City address, San Diego City Attorney Michael Aguirre advises city officials to seek major pension benefit rollbacks in upcoming contract talks with municipal labor unions.

"I'm trying to bring a realistic, needed reform that can restore the financial integrity of the pension plan and re-establish the fiscal strength of the city," Aguirre said in an interview yesterday.

"If we do this, we can avoid bankruptcy. If we don't, it's almost certain we will go into bankruptcy at some point."

Aguirre made his recommendations in a five-page memo dated Friday to the City Council, Murphy and City Manager Lamont Ewell. It was made available to the media over the weekend. Aguirre discussed it with reporters yesterday.

He said the memo's release was not timed to upstage Murphy. "His talk is so important and compelling that nothing could take away from that," he said.

The memo advises Murphy and the council to:

Push for rollbacks of retroactive benefits granted without corresponding funding sources dating to 1996. Aguirre's memo says that as of June 2003, actuary of the San Diego City Employees Retirement System estimated the total value of retroactive benefit increases at $476.3 million, about 40 percent of the pension system's $1.2 billion deficit.

End the practice of the retirement system paying for employees who take advantage of a program allowing them to purchase retirement credits for years they did not actually work. Using 2003 numbers, Aguirre said this practice has deepened the pension deficit by as much as $25 million.

Eliminate the Deferred Retirement Option Program, or DROP, which allows older city workers to have retirement pay deposited into a special account during their last five years on the job. In his speech, Murphy called for eliminating the program. His office clarified that the proposal is to eliminate it for future hires.

Aguirre's memo endorses selling pension-obligation bonds but only to pay for settlements with retirement plan participants. A Murphy plan to sell $600 million in pension bonds, to begin closing the deficit, was approved by the council in October.

The memo said case law indicates that efforts to roll back existing benefits for current employees will pose "a difficult challenge, but it predicted the courts will be receptive to attempts to re-establish financial stability given the city's fiscal troubles.

The memo also said any attempt to roll back benefits will depend on labor union cooperation.

"This office understands this will not be an easy task," the memo said.

"However, given the real possibility of a Chapter 9 (bankruptcy filing), this may be the only opportunity employees will have to provide input into the level of pension benefits that they will ultimately receive."

Johnnie Perkins, spokesman for San Diego City Firefighters Local 145, said, "I think it's a positive memo in terms of laying out some of the things we need to consider.

"We know the city has tremendous financial challenges, and we as firefighters are ready to be part of the solution, and we've been saying that for months."

Judie Italiano, president of the Municipal Employees Association, City Hall's largest labor union, issued a written statement blasting Aguirre for urging the council to engage in "bad faith bargaining."

"Aguirre's legal advice is full of holes big enough to drive a truck through," Italiano said in the statement.

April Boling, who was chairwoman of the city's Pension Reform Committee last year, was generally receptive to Aguirre's suggestions.

"I see exactly where he's going," Boling said.

"He is trying to push through the 'meet-and-confer' process some solution to the retirement plan deficit," she said, using the technical term for the city's labor talks.

Boling said Aguirre is "100 percent correct" that reversing retroactive benefits would shave more than $400 million from the pension system deficit. But she said that she is concerned about city workers who retired after 1996 expecting a certain level of benefits.

"I believe there is going to have to be accommodation for people who, with clean hands, retired with benefits they believed they had," she said.

Aguirre said his recommendations would cause pain but in the end would ensure a reliable source of pension assets for retirees.

Councilwoman Donna Frye said Aguirre's memo is a good start.

"We absolutely have to do something," Frye said. "The fact that this was thoughtfully proposed, with a legal analysis, it at least gets something out there that we can use as a beginning point in the discussion."

Carl DeMaio, president of The Performance Institute, a private business that pushes for government budget accountability, called Aguirre's recommendations "a creative out for the mayor, the council and the unions."

"It's predicated on an untested legal theory but one that looks like it will stand up if all parties cooperate. Failing this, the only option is a bankruptcy court, which provides no input by the unions whatsoever."

[rottndog]

Screw 'em all. Let the pension fund go BK, and let the greedy public employee unions go pound sand. This is where I lose all respect, even for cops and firefighters. Greedy Bastards!!!