Last week, city pension fund trustees made a change that will make pension bills larger for the city and its employees.
In 2016, the city of San Diego sent $261 million to the pension system, writes VOSD’s Scott Lewis. That’s nearly all the funds the city collected in sales tax the same year, $275 million. This year the city sent the pension system $325 million. Next year, projections put the amount the city will send to its pension system at $329 million.
For years, the pension system assumed that the money it collected through taxes and paycheck contributions would get a return of 7 percent when invested every year for 30 years.
That number was a high estimate and last week, trustees of the pension system decided to would lower that return assumption for next year to 6.75 percent, reports Lewis. The following year it would decrease further to 6.5 percent.
That means that employees will have to make higher contributions from their paychecks and that includes the San Diego Police Department, which is already facing a recruitment and retention problem. The city would need to give police officers – who are expecting an actual raise – a nearly 2 percent raise with the new pension contributions, just to keep their salaries where they are.
But there was something else worked into this pension decision that lowered the city’s contributions over the next few years, Lewis reports, which means the city might actually be able to pony up for those police raises.