San Diego Pension Reform Committee Releases Recommendations

September 16, 2004 ( - A Pension Reform Committee formed by San Diego Mayor Dick Murphy has finished its report on how to fix the city's massively underfunded pension plan and the recommendation may be hard for the city to swallow, according to the San Diego Daily Transcript.

The committee released 17 measures to mitigate the growing problem of funding benefits for current and former city employees. The goal is to restore the funding ratio of the pension plan to 90%, up from its current 68.7%. To get there, the city would have to infuse $600 million into the plan, according to the news report.

Most costly so far has been the city’s obligation to pick up all health care costs for almost all of the current and former city employees. The city, surprisingly, does not set aside money to pay for this. The costs are supposed to be born from ‘excess costs’, or earnings on the plan’s investments.

“I believe the solutions are going to be painful,” said Richard Vortmann, vice chairman of the Pension Reform Committee and a member of the retirement system’s governing board, according to the Transcript. “The city must decide whether it truly can afford the benefits it has promised. I question whether it can. If the city professes it can afford them, then I would submit its incumbent upon the city to prove it.”

The committee found that by 2009, the city will have to spend about a quarter of every dollar collected from taxpayers to pay promised benefits to city retirees. This is the result, according to Murphy, of a conscious decision by past and present city politicians who chose to underfund the pension system while still promising increased benefits. “There’s been absolutely no funding for the retiree medical benefit at all,” Vortmann said.

San Diego has recently come under fire from participants for its 1996 decision to underfund the pension system (See Officials Admit They Made Mistake in San Diego Pension Decision ). The City Council has responded by placing reform measures on the November ballot, in hopes of turning around the underfunding crisis (See San Diego City Council Proposes Pension Reforms ).