The economy is doing well and tax revenues are rising – so why are three of San Diego’s largest government agencies facing massive hits to their bottom lines?
The city of San Diego estimates it must slash $47 million to $67 million in spending, San Diego County may have to cope with $100 million in new costs and San Diego Unified is staring down at least $124 million in cuts – an especially dire challenge because the reserve fund has nothing to spare.
Some of their troubles are common.
First, all three agencies are dealing with rising pension costs. State and local pension fund leaders are reducing long-term earning expectations, which increases the amount of money employers must contribute to fulfill retirement promises for current and former employees.
Traditionally, when things don’t pencil out it’s the employer – also known as the government or taxpayers – that are ultimately on the hook to cover losses. In contrast, city of San Diego employees hired after 401(k)-style pension reforms were enacted in late July 2012, except for police, just get less in retirement.
Lowering expected returns also increases each agency’s unfunded pension liability, or the gap between the cost of what’s been promised and what’s in the bank.
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It’s the inmates running the pension Asylum that are loading up system with lucrative "defined benefits" packages for themselves.
The international business world is intelligent enough to know that DEFINED BENEFITS are financial disasters to any business, thus all businesses focus on the known, i.e., defined CONTRIBUTIONS alone.
Stealing from the young who silently shoulder the costs and bear the burden of unfunded promises of these programs to enrich the old seems to describe the Governments expansion of entitlement benefits and other government services, along with the taxes young people will have to pay to support them, mostly to subsidize older Americans.
The inmates know that debt for our future generations buys votes. Over the decades, the proven “concept’ practiced by voters is to defer as much financial responsibilities as possible from our current financial responsibilities to future generations, that have no votes on the subject.
Currently, it’s the future generations that will have the responsibilities to pay for the unsustainable pension programs, other boondoggle projects, and added inefficiencies built into our government. Simply stated, if we cannot afford it today, pass it off to the future generations to minimize any impact on our current lifestyles.
Virtually all elected officials are heavily financed by unions which are focused on entitlements for their current members. Thus, no changes can be expected in the foreseeable future for elected officials to ever abandon their source of votes.
It’s unfortunate that those future generations, unable to vote today, will bear the costs of many enacted entitlements and boondoggle projects.
Doom and gloom have been the annual message of local governments as far back as I can remember. Priming the taxpayer pump for the next round of alms for the poor government agencies.
All this while many local residents struggle to make enough to meet this months needs, San Diego must rank up there as one of the least affordable places to live, and it's getting worse as costs increase and compensation remains stagnant.
The projected shortfall in revenue is self explanatory as once again we (taxpayers) have got to tighten our belts and spend less. Something SANDAG figured out when measure A failed, is we are tired of throwing our hard earned money into the bottomless pit of promises.
At the County level I'm confused about how the Supervisors seriously believes that ACA is going to be repealed and leave millions of people without any type of health care but county funded indigent relief. I don't see that happening.
At what point, is enough Enough?
Agreed! Also, I saw in the news that hundreds of refugees are being resettled here in San Diego.
Why in the world are these poor people being sent to one of the most expensive cities to live in, in the entire United States!?!?!?
It's bad enough that they have absolutely nothing and can't even speak the language (English), why burden them with an astronomical cost of living!?
Why is there no mention in the article of the fact that the County of SD is sitting on $2 Billion in managment reserves? This is well beyond a reasonable cash reserve for emergencies. The City of SD is sitting on over 16% of it's budget for reserves.
How can you project a deficit when you have this much money squirreled away. You use your rainy day fund when it rains!
Maybe the budget problems will motivate the sdusd to reconsider the status of the principals they pay $100k+ to be on "special assignment" for falsifying credentials and sexually harassing students.
An oldie but a goodie.........around 2013
Mr. Morgan was President of the Board of Administration of the San Diego City Employees’ Retirement System
To quote Mr. Morgan .........“Anytime I see a proposal in a system that’s 68 percent funded and here’s the proposal: let’s lower the plan sponsor’s contribution and let’s lower the participant contributions and let’s all ride unicorns and eat lollipops,”
To place the pension issue in perspective, pension costs appear to be a little under 8% of the City of San Diego budget. For people in the pension system, San Diego did not contribute to Social Security. In the private sector, a contribution of 6.2% of payroll for most workers is paid to Social Security, plus varying contributions to 401(k) and other benefits.
Qualcomm, as an example, pays for Social Security, of course, and a company match of employee 401(k) contribution of 100% on first $1,500, 50% on the next $1,500, 33% on next $7,500, and 10% thereafter, 50% vested after 1 year, 100% after 2 years. They also offer a stock purchase plan that allows employees to purchase company stock at 85% of the fair market value, along with various other benefits.
@Chris Brewster Also the average Qualcomm salary appears to be $100K+.
“Very unfair” (as Trump would say).
The "mission" of government has changed. The mission of government is to pay pensions. Same can be said for schools.
I, and many others, have been beating this dead horse for years but our arguments have have been dismissed and ignored.
I wish I would of been wrong about it but yes........there has been a tsunami approaching and it is now right off the shore.
Unfortunately this year will only be the first wave to hit budgets and the response will be to extend the payment period over many more years and yet another generation will be indebted. this generation wasn't even born when these golden parachute benefits were started.
I've said it before. It is fiscal pedophilia. You should not abuse kids futures in this way.
Quite frankly its disgusting
Just say it, "It's the pensions, stupid!" Trace the budgets back 20 years or so and check the percentage of the budgets of the city, the county, the state and, yes, SDUSD devoted to pension expenses. They are simply eating most California public agencies alive, and the primary culprit is the retirement ages. Why do public employees retire at 50 or 55 years of age with a full pension while private sector employees, those that still enjoy a defined benefit plan, wait until age 65? If they retire earlier, they get an "actuarial reduction", an offset in the monthly amount of the pension because they'll be drawing it longer.
Another important factor is the COLAs, guarantees against inflation, again something that few private sector employees enjoy. This can add 10-50% to retiree costs, depending on longevity.
And the third factor is that, around the year 2000, most public agencies, playing follow the leader, increased their pension formulas retroactively, so that earned pension credits increased an average of about 25%, which instantly created massive unfunded liabilities covering everyone on the payrolls.
In order to avoid unmasking the extent of the problems created by these actions, pension boards, largely made up of pension plan participants, kept the fund earnings assumptions at unrealistically high levels, so the unfunded liabilities appeared smaller. Now, after a number of years of modest economic growth, these assumptions must be cut, increasing the deficits and upping required agency pension contributions.
I went to my local town council meeting last night and listened to why city services, things like code enforcement, are so lacking. Every department claims to need more people. Well, they aren't going to get them, and communities are going to find themselves self-funding services cities and counties used to routinely provide in order to pay for unnecessarily generous public employee pensions.
Welcome to California 2017. It's not going to get better in the near term.
The issue at the county level smells very fishy. Did health care costs decrease by $100 million after ACA was passed? I certainly don't remember reading such an article. If all of those people becoming insured reduced costs by so much then why were county officials recently pedaling a sales tax increase for roads? They should have been rolling in money. I will never understand why we keep electing the same types of people over and over. Unfortunately the lesson learned here is to stop trusting government with your money. Even after substantial tax increases the fact that the schools are dealing with the same catastrophic budget issues as before just proves that there is serious mismanagement going on, and there has been for years. The people that pedaled these tax increases ought to be shunned, but they won't be. They'll just ask for more money.
Indeed excessive employee compensation are burying these govt agencies. Consider Poway Unified School District. When Sacramento was able to offer a 1x gift of additional cash in 2015 the unions demanded raises for their employees which created obligations well into the future. This is an unsustainable model. It is largely why PUSD had a $10.8M structural deficit last budget year and a projected $18.4M structural deficit this budget year. Pension obligations for CalPERS and CalSTRS are about to hockey stick up in the next few years, so the problem is only going to get worse. It's a math problem.
Govt employee compensation is doled out largely for political purposes as a quid pro quo to employee unions for their campaign endorsements and funding for their elections. The unions have perfected this messaging during election season that if you oppose these excessive costs purely on fiscal responsibility grounds you therefore want crime to increase, homes to burn down and children to starve in schools.
Thank you Ashly for shedding light on this problem.