San Diego Mayor Outlines Pension Reform in Speech

January 11, 2005 ( - In his State of the City address, San Diego Mayor Dick Murphy has stressed his commitment to saving the city's beleaguered pension system.

Although he did not specifically blame any one individual for the current problems with the city’s underfunded pension system, Murphy pointed to “intolerable lapses” by the city government. San Diego’s pension deficit currently stands at $1.2 billion.

Murphy outlined his cost saving plans in the  speech , all of which would require major concessions from the city’s four employee unions and would also require City Council support.

Murphy called for a two-year salary freeze that would save $40 million a year, and could be pumped into the city’s pension system. This would also reduce the city’s liabilities by decreasing future pension payouts that are based on workers salaries, he said.

He also said that the city must eliminate the Deferred Retirement Option Plan (DROP), which allows longtime workers draw retirement pay in their final five years of employment.

Murphy also suggested that the city issue $200 million in pension obligation bonds to help repay the underfunding. However, the city must release two overdue audits.

“It will require sacrifice by many people,” Murphy said in the speech. “But in the short run, this plan should avoid massive service cuts and employee layoffs. And in the long run, it will stabilize the city’s financial situation.”

At least one union supported the Mayor’s move, with the firefighter’s union representative, Johnnie Perkins, asserting that the moves were necessary, according to the San Diego Union-Tribune.

The San Diego pension program has had numerous problems since the mid-1990s, when the city decided to start intentionally underfunding the system (See Officials Admit They Made Mistake in San Diego Pension Decision ).