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    If you think the decade-long saga of San Diego’s pension system is in the past, you’re wrong.

    The state labor board has thrown down a doozy of a decision against the city, attacking former Mayor Jerry Sanders and other politicos’ machinations in advance of the June 2012 ballot initiative that gave most new city employees 401(k)s instead of pensions.

    The result could cost the city a ton of money, restart the pension system that had been closed for new employees and generally cause pandemonium – and all because Sanders wanted his name on the pension initiative.

    It goes back to the discussions about how to get the measure, Proposition B, on the 2012 ballot. The mayor is the city’s chief labor negotiator and state labor law clearly states that city employees are entitled to bargain for their benefits. Sanders and others tried to get around this by saying that he was acting as a “private citizen” not the mayor by backing the initiative. Had Sanders tried to negotiate the deal with labor groups, it’s likely the majority of the City Council would have stymied him. But he also had the option to let others do the initiative themselves. Labor unions sued throughout the process and the state’s Public Employees Relations Board released its final ruling Tuesday. (Scott Lewis did a rundown of this legal case a few years ago in a piece about City Attorney Jan Goldsmith.)


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    And what the board said the city now has to do is astounding:

    * Pay all the city employees in the 401(k) system lost wages with 7 percent interest from each year they lost out.

    * Pay the labor unions’ legal costs, including funding future legal action related to the case.

    * Restore the benefit system to what it was before Prop. B

    It’s unclear how any of this would actually happen. The tax rules regarding retirement systems are really complicated. And the labor board specifically said it was not repealing Prop. B. Thus, the provisions would have to remain in the City Charter but ostensibly not followed, which seems to present a whole other set of legal issues.

    Mike Zucchet, the head of the city’s white-collar labor union, said the city should immediately begin negotiating with its employees for how to fix this.

    “If they don’t pay now, they’re going to pay later and the city is going to continue to suffer for it,” Zucchet said.

    Current Mayor Kevin Faulconer, whose own efforts to support the initiative while a city councilman are sprinkled throughout the ruling, wants the city to appeal the labor board’s ruling to the state’s Fourth District Court of Appeal.

    “Mayor Faulconer believes the will of the voters should be upheld and is confident that an appellate court will affirm the right of the San Diego people to enact pension reform,” Faulconer’s spokesman Matt Awbrey said. “The City Attorney’s office will be bringing the matter to the Council as quickly as possible.”

    Here is the entire 121 page labor board ruling. You might want to read it for trip down recent San Diego political history and a pretty hilarious summary of the efforts to distinguish between Jerry-Sanders-As-Mayor and Jerry-Sanders-As-Just-Some-Guy.

    This is one such passage I particularly enjoyed:

    Bargaining unit employees and the public were reasonable in concluding that the Mayor was pursuing pension reform in his capacity as both elected official and the City’s chief executive officer based on his public statements, news coverage of those statements, and his history of dealing with unions on pension matters, some in the form of proposed ballot initiatives. Most telling was the April 2011 news conference, which aired after the culmination of a four-month effort to coalesce support around a single initiative measure in concert with organized private interests. The press conference took place at City Hall. The 10:00 p.m. local television news report described the Mayor’s plan to proceed with the compromise initiative as the joint effort of the Mayor and Councilmember (Carl) DeMaio. The Lincoln Club and San Diego Taxpayers Association were only mentioned as having brought the two City officials together. In the cases of vicarious liability, lower ranking management representatives are less likely to be viewed as speaking for management. The Mayor operates as a strong mayor and is the highest ranking elected official whom the public could reasonably believe spoke for the City and reflected its policy.

      This article relates to: City Budget, Government, Must Reads, Pensions

      Written by Liam Dillon

      Liam Dillon is senior reporter and assistant editor for Voice of San Diego. He leads VOSD’s investigations and writes about how regular people interact with local government. What should he write about next? Please contact him directly at liam.dillon@voiceofsandiego.org or 619.550.5663.

      33 comments
      john stump
      john stump subscriber

      So, what you are saying is the City's just as bankrupt as San Diego's schools? The only future we got are more land sales, less services, and more taxes? Does this explain why we couldn't keep the Chargers and why there is talk of sales of the Water Department to a private company? Should we go while the goings good or just wait for Climate Change to end it all? Thanks for the Happy New Year's wake up call

      john stump
      john stump subscriber

      Why not put the City's workforce on Social Security?

      Chris Wood
      Chris Wood subscriber

      @john stump  It is because government employees cannot live on Social Security of $16,092 per year even with Medicare. 


      Perhaps checking annual pension amounts is a good place to start to find what is affordable, after all we do not want to end up like San Bernardino in bankruptcy.  


      It may be that in good economic times governments tend to promise their employees “two” chickens in every pot – which come home to roost during recessions (as in San Bernardino).  So we should be very careful if long term stability is desired.


      https://faq.ssa.gov/link/portal/34011/34019/Article/3736/What-is-the-average-monthly-benefit-for-a-retired-worker


      http://transparentcalifornia.com/pensions/2014/san-diego-city-employees-retirement-system-sdcers/employers/


      Chris Brewster
      Chris Brewster subscribermember

      Mr. Stump: The city's workforce was in fact on Social Security. In the 1980s, Republican Mayor Pete Wilson decided it would be best to take the city's workers out Social Security and create a local pension system. The belief was that it would save money. Proposition B notably contained no requirement to give Social Security to workers who were taken out of the pension system. To my understanding, they get a 401(k) and no Social Security. I don't think any worker in the private sector has no pension and no Social Security, but I'm not sure.

      john stump
      john stump subscriber

      Both Democrats and Republicans voted for the negotiated pension change. I do not think the then adopted system is the same benefit bankrupt ing the City now. Regardless, let's correct the experiment and provide social equity with the taxpayers. One pension and health care system for all. Everyone teachers, taxpayers, police, fire, legislators, and all the rest of us. It seems unjust that the government gets a different system than the Citizens.

      Chris Brewster
      Chris Brewster subscribermember

      Mr. Stump: I concur that we should all be advocating for retirement security for everyone. Rather than attacking the benefits of some public employees, why not promote similar benefits for those in the private sector? Indeed, the state is in the process of developing something of this sort: http://www.treasurer.ca.gov/scib/. As for your statement that, "Both Democrats and Republicans voted for the negotiated pension change," kindly name the Democrats that voted for it? I am unaware of who they are. I mention Pete Wilson because he is a famous conservative politician and was behind the change. I mention this not to tar Mr. Wilson, but to counter the argument that evil labor unions are the source of all of this. In fact, most, if not all, of the changes to the City's retirement system were approved by majority Republican city councils. It is a canard that some employ to suggest that it was Democrats.

      Joe Jones
      Joe Jones subscriber

      "The state labor board has thrown down a doozy of a decision..."

      Oh, for crying out loud. Any other decision would have been a "doozy," this was as predictable to all parties as the sun rising in the east tomorrow.  The state labor board ruled in favor of the unions, shock of shocks. When the Appeals court rules, then we'll have a story.

      john stump
      john stump subscriber

      Proposition B passed with some 154,000 votes and nearly 65% approval how will the interests of the voters be represented?

      Chris Brewster
      Chris Brewster subscribermember

      Mr. Stump: This is an intriguing question. Every initiative on the ballot comes with advocates and opponents making various claims, some legitimate and some specious. I would assume that most voters voting in favor of this proposition presumed that it was legal and would result in a cost savings for the city. The PERB ruling (I encourage people to read it as it is fairly plain language, albeit lengthy, and relies on clear legal precedent) is that it is illegal. If that ruling prevails, the voters (or at least most of them) were bamboozled by the proponents (who assured them it would pass legal muster). Meantime, every day this goes unresolved, the city’s bill mounts. That is, contrary to saving money, there is a cost that could be quite substantial. 

      Had the voters been told, up front, by the proponents: This is a gamble, it could save a lot of money, but it could cost a lot of money, I doubt it would have garnered the votes it did. 

      My view is that the voters were given bad advice by the proponents of the proposition. That bad advice could cost the city a lot of money. I think the best interests of the citizenry at this point is to stop the bleeding. If I were a voter who voted in favor, assuming it was a sure money-saving effort, but found out it might actually be an exploding cigar, I’d have serious buyer’s remorse at this point.

      It’s good also to consider that many of the proponents of the proposition used it for personal political benefit. It advanced their careers and/or promoted their profiles. Thus they may have had reasons beyond the best interests of the citizenry to promote the initiative. They will not, of course, have any personal liability if the measure is ultimately overturned. That cost will be borne by us.

      I would hope cooler heads prevail before the costs get any greater.

      Mark Giffin
      Mark Giffin subscribermember

      @john stump 

      Well John the message is clear in this ruling. 

      Don't bother voting for reform. The public employee unions own you.

      The ruling has bigger implications than San Diegos' pension reform. Since the pensions get paid first and before anything else in the citys budget if those costs go up because of bad returns or increased wages/benefits then Service/maintenance levels go down because of it. This is playing out through out California and the nation.There is only so much money in the general fund any given year.

      The mission of govenment has been morphed into paying public employee pensions and healthcare. It is the root cause of the credit downgrades and budgetary problems though out the U.S.

      In the case of San Diego those payments are now over 100 million per year more than they should be and will be increasing yearly though 2025 because of the under funding pension scheme.

      I've asked VOSD to lay out of the yearly projected pension payments through 2025 so that the public can see just how significant a strain this will be in the years ahead. I suspect this short fall is the real motive behind the so called "Citizens initiative" as those monies will go to the general fund

      So far its been nothing but a thunderous silence

      Marc Davis
      Marc Davis

      To quote the City Attorney who recently stated "when claimants fail to follow legal process, they will ultimately lose."

      I think the City Attorney should heed his own words. He can call the PERB all the names in the book as well a dismiss the board all he wishes. His judgments in this area are going to cost tax payers either way if not more with an appeal. When you get in bed with someone the likes of a Carl De Maio and groups with an agenda like the Lincoln Club who's sole mission was to destroy employee unions you make mistakes rather than follow the law. I hope the current Mayor who was part of this effort with Prop B  takes a step back and reviews this carefully for himself! He has done a fine job with Charger stadium issue. He seems to be leading for himself rather than sailing on board a ship of fools.

      Mark Giffin
      Mark Giffin subscribermember

      The ruling shouldn't surprise anyone.The state labor board is a union tool.

      Hopefully the city moves to appeal.

      Chris Brewster
      Chris Brewster subscribermember

      Mr. Giffin: The mission of government is to serve the interests of the people. 

      Chris Brewster
      Chris Brewster subscribermember

      Mr. Giffin: I understand the temptation of some to assume the PERB is union friendly. Whether that is backed up by objective review, I don't actually know. The PERB is charged with enforcing existing labor law. The ALJ opinion in this case is heavily founded on (with extensive references to) existing state labor law. The PERB found that decision to be proper under law. It would not be logical, in my view, for the city to appeal the case based on dogma surrounding support for Proposition B or an assumption that the PERB ALJ decision is flawed based on bias. The logical question is whether there is any meaningful chance of success upon appeal (if appeal is granted) and what additional cost might be incurred if the appeal is unsuccessful. Here's the rub: The remedy ordered by the PERB would require the city to make all newly retained employees denied pensions whole. That would presumably require the city to pay both the employer AND employee contributions to the pension system over the period to be remedied. The longer this drags out, the greater the cost of the remedy to the city. Conversely, if it is solved in shorter order, employees can begin contributing their share. There is obviously an enormous amount of politics in this, but the cost of a wrong decision could be quite high. It may be politically expedient for the Mayor and City Attorney to scream for an appeal, but they, of course, will not pay the price if the appeal fails.

      Mark Giffin
      Mark Giffin subscribermember

      @Chris Brewster 

      If the city does not appeal then we end up like Chicago. If the city does appeal and loses then we end up like Chicago.

      unless the city deems the risk of loosing too high then they need to respect the voice of the voters and appeal.

      This is playing out across this country. city, state and county governments budgets and credit ratings under extreme stress because of.......under funded pensions and healthcare for employees

      I've asked this question before Chris

      Just what is the mission of government?  Public employee wages and benefits?

      lorisaldana
      lorisaldana subscriber

      @Chris Brewster I've often said: the mission of government is to invest in shared infrastructure that supports economic growth, and provide services that keep people safe, healthy, and educated, so they can provide the same opportunities for the next generation.


      OTOH, the mission of "politics" now appears to be: elect the wealthy so they can cut their taxes to the point that government no longer has funding for infrastructure, safety, health & education services...

      Chris Brewster
      Chris Brewster subscribermember

      Indeed, all of this could have been avoided had Mr. Sanders and Mr. DeMaio followed the law. Their hubris is source of the problem.

      As for this being some sort of surprise: The PERB ruling by the Administrative Law Judge was issued February 11, 2013. Any policymaker or journalist who sees this final ruling of the Public Employee Relations Board as a surprise simply wasn’t paying attention and didn't read the ruling. The original ALJ ruling was meticulous and clear in its methodical citation of existing labor law. All that the PERB has done is to agree that the ALJ’s finding was correct. 

      As for Mr. Sanders wanting to put his name on the initiative, I question whether this was simply an ego exercise. I think instead that he wanted to promote it through use of his name and to use the public initiative process to avoid having to bargain with labor unions. In fact, that is what made it defective because under our strong mayor form of government the mayor cannot be a private citizen with respect to city policy matters. He represents the city and the city is obligated under law to bargain in good faith. The city or mayor can't simply act by fiat.

      As for Mr. Goldsmith’s protestations and saber rattling, the city is in a very precarious position on this issue thanks to Mr. Sanders, Mr. DeMaio, and Mr. Goldsmith. Mr. Goldsmith elected not to mount a meaningful case before the PERB, perhaps because of a view that it was pointless, but upon appeal, he cannot introduce new evidence to the court that was not presented to the PERB. He can only argue based on the record he created in his PERB appeal, which was effectively no record because he was dismissive of them. He is in effect hoist by his own petard. Moreover, he will be out of office by the time a ruling is issued, if that happens. The city is disadvantaged by his ego driven legal approach of thumbing his nose at the PERB. The courts generally defer to the expertise of the PERB because they are the experts on labor law and statutorially delegated to arbitrate it. The chance of the PERB ruling being overturned by the courts is quite slim.

      Finally, it’s important to be aware that the city does not have an automatic right of appeal. It’s up to the Fourth District whether they wish to grant that right. 

      Mr. Zucchet is correct. The prudent thing is to negotiate a settlement. The legal case is a loser and the longer this goes, the more it costs.

      lorisaldana
      lorisaldana subscriber

      @Chris Brewster excellent analysis. thanks for the additional background information.


      For those who insist union "tools" are creating the problems, and/or that no one should ever receive public pensions: in fact, very few workers do get pensions these days, so: congratulations "small government" advocates- mission accomplished!



      lorisaldana
      lorisaldana subscriber

      @Mark Giffin @lorisaldana @Chris Brewster


      thanks Mark- I edited my comment for a bit more clarity. 


      The "small government" remark was not intended to be aimed at anyone personally. It was a general assessment of the Karl Rovian "drown government in a bathtub" mindset that has permeated politics in recent elections.

      Joe Jones
      Joe Jones subscriber

      @lorisaldana @Chris Brewster  Oh come on, Lori. The concept of pension reform has exactly zero to do with "no one" receiving pensions. But what's a little hyperbole between friends?

      lorisaldana
      lorisaldana subscriber

      @Joe Jones @lorisaldana @Chris Brewster


      Recent efforts to "reform" pensions have actually been intended to "end" them for public employees. This includes San Diego's Prop. B, which replaced pensions with 401(K) only retirement plans (employees receive no social security) and this year, the failed attempt to qualify a state ballot measure that stated:


      "Eliminates constitutional protections for vested pension and retiree healthcare benefits for current public employees, including those working in K-12 schools, higher education, hospitals, and police protection, for future work performed."


      The key word is "eliminates"- not "reforms"

      .

      Moreover, most private employers have already ended pensions in favor of 401(K) plans: "The percentage of workers covered by a traditional defined benefit (DB) pension plan that pays a lifetime annuity, often based on years of service and final salary, has been steadily declining over the past 25 years. From 1980 through 2008, the proportion of private wage and salary workers participating in DB pension plans fell from 38 percent to 20 percent (Bureau of Labor Statistics 2008; Department of Labor 2002)."


      Given these recent efforts aimed at ending pensions for public employees, and rapid rate of decline in private employment, I stand by my statement: the end result of these efforts would be an end to pensions.

      Chris Brewster
      Chris Brewster subscribermember

      Ms. Saldana: I would only add that we should lament the loss of retirement security in both the public and private sectors. What has happened historically is that private employers have mostly ended pensions for a variety of reasons, including the fact that workers in the private sector tend not to work for one company for their entire working life these days, but also to save money. As this has happened in the private sector, it has created pension envy of those who still have pensions, many in the public sector and a sad view that, "If I can't have it, you shouldn't either." This is, in effect, a race to the bottom in which the working class argue among themselves about each other's piece of the pie. In my view, we should reorient our thinking toward finding ways that all working class people are enrolled in meaningful, reliable systems to ensure retirement security. That will benefit them, of course, but will also benefit the society at large because absent such security, they will become a burden on society and we will all pay, one way or the other. The California Secure Choice initiative should help somewhat with this: http://www.treasurer.ca.gov/scib/

      Joe Jones
      Joe Jones subscriber

      @lorisaldana @Joe Jones @Chris Brewster  Lori, nice try. First, the conversation is about "public" pensions. Your (gratifying) statistics that private sector companies are attempting to remain competitive in a global economy by closing Fantasyland (lifetime guaranteed annuities) is a cause for celebration--at least for those who believe in a viable economy and shorter unemployment lines.


      Second, the sheer sophistry of your argument re: the public sector is transparent. Prop B and similar efforts (overwhelmingly approved by voters) provide for an alternative to pensions, they don't "eliminate" retirement benefits, which is the salient point here. You will of course argue that B is intended to reduce the city's obligations to retired workers in the future. Exactly.

      Even a cursory look at the stats re: federal and state pension obligations shows an unsustainable system. This past month alone, publications from the New York Times to the Wall Street Journal have laid out the numbers in stark detail; a simple Google search will enlighten you. 

      Bottom line, public sector unions have successfully funded the campaign of certain politicians in exchange for reliable votes, with most impressive (and potentially devastating) results.


      You wouldn't know anything about that, would you?

      If your comrades on the Labor Board (a majority of whom once worked for the SEIU and CTA) are upheld on appeal, it simply means B loses on a technicality. The next effort, and the next, will receive the same overwhelming voter support. Score one for sanity.






      lorisaldana
      lorisaldana subscriber

      @Chris Brewster  Sadly, the "race to the bottom" attracts contestants who never question the basic premise of the competition: everyone ultimately loses...or at least, at present, 99% of us are.


      As Ronald Wright astutely observed: “Socialism never took root in America because the poor see themselves not as an exploited proletariat but as temporarily embarrassed millionaires."


      (Would have replied earlier, but was taking a brief holiday to travel in a democratic socialist nation that shall remain nameless.)

      john stump
      john stump subscriber

      In elections strategy class they warn of the "November Surprise", this decision has the potential of focusing the election debate on a taxpayer versus unions position. Current Council members, seeking higher office, and Candiates competing for Council seats will hear the defining refrains of "WHICH SIDE ARE YOU ON ?"

      http://m.youtube.com/#/watch?v=jSZWslqjfPE or the more nostalgic version of the Seger classic http://m.youtube.com/#/watch?v=cxfZtNEG1xU

      Elmer Walker
      Elmer Walker subscriber

      If there was ever any doubt whether the taxpayers/elected officials  or the employee unions run the city, look at what just happened. We forgot to ask the unions if we could. They said no and we went ahead and change the pension plan. Now we are being told without the unions approval, the change was not valid. Wow. Let's find a way to get rid of the unions.

      john stump
      john stump subscriber

      I think the Pension determination gets worse the more you think about it. As I remember, the Council's benefits were changed by Proposition B . So the Council would benefit by voting not to appeal. Council could get bonus benefits by letting the Appeal lapse . Are all the Council members conflicted and can nobody vote on this matter? Does this become one of those City of Bell conflicts of interest things?

      lorisaldana
      lorisaldana subscriber

      Someone tell the Mayor & City Attorney- Please: no appeals.


      An appeal means more delays, higher costs, and is simply throwing good taxpayer dollars after bad, to pay for the current and former Mayor's incompetence and malfeasance against city employees. 


      At this rate- no one will want to even work for the city, let alone serve in office here... what an embarrassment.

      Joe Jones
      Joe Jones subscriber

      @lorisaldana Spoken like a true impartial advocate of sanguine legal jurisprudence. No dog in this fight, eh Lori?

      Don Wood
      Don Wood subscriber

      When this debacle is finally resolved, can the city add up how much money it has cost and send bills to Jerry Sanders, Carl DeMaio, Kevin Falcouner and Lori Zaph for ruining the city's finances in their rush to hurt city employees and the union?