The Next Mayor's Potential Budget Windfall - Voice of San Diego

City Council

The Next Mayor's Potential Budget Windfall

The city’s pension payment should be lower next year, which could translate into a budget surplus.

San Diego’s next mayor won’t have much time in office before he or she has to have a budget ready in April. He or she will, however, likely have some cash to throw around.

The city could have a dramatically lower pension bill next year, which could translate to lots of extra money in the budget.

The retirement system announced preliminary investment returns of 13.4 percent last year, far exceeding its 7.5 percent annual goal. The pension board’s unexpected decision to punt savings from a five-year labor deal could result in extra savings for next year.

It’s unclear exactly how much money is at stake. Finance Director Jeff Sturak said the city won’t release budget surplus or deficit projections for next year until November. And the pension system, which calculates the bill based on factors beyond annual investment returns and employee salaries, won’t put out its figures until January. But the investment returns and potential labor deal savings are meaningful to next year’s bill, which is now projected to be $281 million — an amount equivalent to almost a quarter of the city’s day-to-day budget.

“All indications are that it should be lower,” Sturak said.

This puts the next mayor in much better position coming into office than the situation Bob Filner faced. Investment returns in 2012 totaled 0.9 percent, and the pension system ate the costs of transitioning from pensions to 401(k)s for most new hires as part of the Proposition B ballot measure. The pension bill ballooned by almost $40 million from initial estimates to $275 million this year.

During the 2012 mayoral campaign, candidates’ promises for big new initiatives at times conflicted with the reality that pension headwinds meant the money wouldn’t be there.

San Diego remains cash and services poor – by its own calculations, city roads deteriorate faster than they can be fixed, for instance – but this possible windfall could ease the next mayor’s transition.

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