Approved by the San Diego Committee earlier this week, the Pension Reform Committee will be charged with evaluating the city’s $2.8-billion retirement system. This may prove to be no easy task, since San Diego’s pension has been battered in the past couple of years, with a deficit of at least $720 million and $1.1 billion in unfunded retiree health-care costs, according to a San Diego Union-Tribune report.
The committee is being brought in to examine the system’s needs and its performance compared to other public and private pension programs, and determine whether the City Employees’ Retirement System Board of Administration should be restructured, Mayor Dick Murphy said. Murphy also assured retirees that despite the recent bumpy road traveled by the defined benefit plan, their benefits are safe.
Nominated by Murphy, the city council unanimously approved the nine-member committee, which is composed of five members with experience in pension plans, one taxpayer representative, one retiree, one city employee and one retirement board member. Membership includes:
- April Boling – committee’s chairwoman is president of the San Diego County Taxpayers Association.
- Richard Vortmann – committee’s vice chairman is president of National Steel and Shipbuilding Co. and was a member of the Mayor’s Blue Ribbon Committee on City Finances
- Judie Italiano – the city employee representative
- Stephen Austin – a certified public accountant
- Robert Butterfield – a lawyer
- Timothy Considine – an accountant
- Stanley Elmore – a retired police officer
- William Sheffler – an actuary
- Kathleen Walsh Rotto – a relationship manager with the Principal Financial Group.
Like many public and private retirement systems nationwide, San Diego’s city retirement system has been damaged in recent years by investment losses and years of underfunding by the city, a practice dating to the mid-1990s and used by mayors and city councils to balance tight city budgets. Additionally, the fund has been squeezed by demographic forces – retirees are living longer – and by political forces, including the granting in recent years by mayors and councils of generous retirement benefits to city workers, particularly public-safety employees.
Despite this, it was not until last year that the City Council committed to a payment schedule intended to bring the system to full funding within several years. However, with such an aggressive schedule also comes fiscal pain, such as putting the squeeze on city services as the retirement system’s liabilities eat up an increasingly larger share of the city’s budget.
It is the potential for a tightening of the fiscal screws that now has the mayor casting a suspicious gaze out five years, to 2008, a year the city’s annual payment to the pension system is projected to soar to $240 million or more, up from the $112 million bill this year. Asked how he plans to pay the massive bill in the summer of 2008, Murphy said, “I would hope that this pension reform commission will be able to avoid that train wreck.”