Labor Board Tells San Diego Pension Cuts Were Illegal; Could Cost $100 Million

Thursday, December 31, 2015

San Diego voters were clear in June 2012, when two-thirds of them approved Proposition B—they wanted to dramatically cut retirement benefits for city employees. But on Wednesday the state Public Employment Relations Board (PERB) said they should have talked to unions first before ripping up their contracts at the ballot box.

State law is pretty clear about city employees having the right to collectively bargain. Then-Mayor Jerry Sanders and other city officials were prime movers behind putting Proposition B on the ballot―without consultation, much less negotiation, with unions.

The lawsuits alleged the mayor used the power of his office to help gather the 116,000 signatures that put the measure on the ballot. A union request for an injunction to block implementation of Prop. B was rejected weeks after passage. Superior Court Judge Luis Vargas ruled the city had met its obligations to meet and confer.

Prop. B substituted a 401(k) for a pension for most new city hires, excluding police officers. Those public safety workers still get a pension, but it will max out at 80% of the individual’s salary, not the current 90%.

The ballot measure also capped the city’s overall payroll for five years at 2011 levels and removed the San Diego Charter requirement that a majority of all city employees vote to approve any changes to retirement benefits.

City Attorney Jan Goldsmith said the board’s ruling will be appealed to the California Fourth District Court of Appeal if the city council gives the nod. “The law does not give labor unions the power to negotiate the terms of a citizens’ initiative,” he said.

The cost of losing could be enormous. The ruling requires that 2,000 employees be given pensions retroactively and reimburse the employees “for the value of any and all lost compensation, including but not limited to pension benefits.” Employees get 7% interest on the money they didn’t get and the city gets to pick up attorneys’ fees.

“I don’t know whether it’s $5 million or $500 million, but if I had to guess I’d say it’s somewhere in the $100 million range,” Michael Zucchet, general manager of the Municipal Employees Association, told the San Diego Union-Tribune. “It will only get more expensive if they keep filing appeals.” 

Prop. B was popular in San Diego because, like many municipalities, it forecasts a large problem paying its pension obligations. The city calculates it has a $2.1-billion deficit. Supporters projected Prop. B would save $8.3 million the first year and $141 million over the first five.

By 2040, the savings would amount to $1.6 billion. That could be a lot of money to repay employees if the appeals drag on until then.

–Ken Broder


To Learn More:

Ruling Could Mean Pension Pandemonium for San Diego Again (by Liam Dillon, Voice of San Diego)

Ruling Threatens San Diego Pension Overhaul (by David Garrick, San Diego Union-Tribune)

State Labor Agency Orders City to Bring Back Defined Pensions for Employees (by Wendy Fry and Gene Cubbison, NBC San Diego)

San Diego Voters Approve Cuts to City Pensions (by Katie Orr, Capital Public Radio and Elliot Spagat, Associated Press)

Analysis: San Diego's Polemic Plan For California Pension Woes (by Jim Christie, Reuters)

Four Consolidated Unfair Labor Practice Cases (Public Employment Relations Board) (pdf)

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