Pension Problems in America’s Finest City

By Jordan Bruneau
January 22, 2021

San Diego’s pension problems are a microcosm of the state: There’s a growing public pension storm in San Deigo. As reported by the San Diego Union-Tribune this week, the city’s pension debt has been revised up from $3 billion to $3.3 billion, nearly triple the debt level of 2007. The pension board is demanding a $50 million increase in the city’s annual pension contribution — $415 million instead of $366 million. And this annual contribution will only grow in the coming years as the pension system is only about 70 percent funded.

The proximate causes of city’s pressing pension liabilities — as is the case in municipalities throughout the state — can be chalked up to three factors:

  1. City workers are living longer — into their 80s and 90s.
  2. City workers are being paid more — average salaries increased by 7.5 percent last year, more than double the projected rate.
  3. Pension system investments have underperformed the rosy projections.

Yet the underlying reason for such unsustainable pension liabilities is government unions who have demanded generous payout packages from the politicians they elect.

How can the city pay these increased obligations? Revenues in the tourism-dependent city have been hit hard by Covid-19 business restrictions. Yet tax rates are already high. For instance, the city’s hotel tax is 10.5 percent. Raising taxes further will chase away visitors and economic activity. Yet government unions will never agree to pension reform.

So, the likely solution is a further curtailment of services: Fewer potholes fixed. Longer waits for first responders. And fewer social services that are needed now more than ever.

The kicker: San Diego’s pension system will likely have to absorb thousands of new members not accounted for in these estimates because a Superior Court judge recently invalidated Prop B, a 2012 municipal ballot measure that moved all city employees hired after that year to a 401k-style retirement benefit system. This influx of pension obligations may be the wave that destroys the pension sandcastle.

Speaking of America’s Finest City: This week, the Biden administration nominated San Diego Unified schools chief Cindy Marten for Deputy Education Secretary. Marten has presided over the district’s so-called anti-racism efforts and the watering down of grades. Predictably, because she’s an advocate of government unions, she has attacked charter schools – the one bright spot in San Diego’s otherwise dismal public school performance where poor kids are concerned. She’s “a curious pick for a deputy secretary of education nominee, given the Biden administration’s call for unity, racial equity and support for working families,” said Nina Rees, president and CEO of the National Alliance for Public Charter Schools.

There’s enough to worry about in California without Washington: In a Sunday op-ed in papers throughout Southern California, CPC President Will Swaim explains how further empowering government unions, as Gov. Newsom’s recently announced budget intends to do, will only exacerbate the many problems plaguing the state:

California has the country’s seventh-highest unemployment rate, with 1.5 million people looking for work. Poverty, economic opportunity, and income inequality are all among the worst in the nation. The state’s strict Covid-19 restrictions have caused immense small business pain for little-to-no apparent gain. Hospitalizations per capita are near the highest in the country, and many ICUs are overrun.

California’s tax and regulatory burden are downright European, making it very difficult for small businesses to stay profitable even at the best of times. Californians earning a mere $59,000 per year face a 9.3 percent tax rate. Yet, Golden State residents get almost nothing in return for their massive tax burdens. Schools are failing (when they’re open), homelessness is out of control, infrastructure resembles the Third World, and first responders are slow to arrive, if they come at all. That’ll get worse to the extent California communities succeed in defunding police.

Electricity rates are among the highest in the nation, and paying $4 a gallon gas raises everyone’s cost of living. Meanwhile, the green mandates that drive up energy prices haven’t helped the environment, as annual forest fires due to a lack of forest management destroy air quality and decimate entire cities. Recurrent blackouts mean Californians don’t even get reliable energy in return for their high bills.

Add “failed vaccine rollout” to the long list of California’s problems: On the latest episode of National Review’s RadioFree California, Will and CPC Board Member David Bahnsen discuss Newsom’s catalog of failures, with the bureaucratic and botched vaccine rollout being the latest and greatest. They also consider new state laws, the precarious state of free speech, and Bridget Mason, a real California hero – even if we don’t hear much about the former slave who became a major LA landowner and entrepreneur, founder of the AME Church, and comforter of the homeless.

Green activists disproportionately hurt the poor: In his latest analysis, CPC contributor Edward Ring explains how Fullerton, Costa Mesa, and Irvine’s decision to enter the utilities business will likely further raise electricity prices on beleaguered ratepayers who pay nearly twice as much as their compatriots in other states:

The problem with newly formed independent, city-owned utilities being “more aggressive than private utilities” in developing clean renewable sources of energy is the existing state mandates are already the most aggressive in the nation, if not the world….

According to the U.S. Energy Information Administration, California’s residential rates for electricity in October 2020 were 20.8 cents per kilowatt-hour, compared to a national average of 13.6 cents per kilowatt-hour. In Texas, residents only pay 11.9 cents/KWh, in Utah, 10.3 cents/KWh. Even progressive Oregon manages to keep rates lower than the national average, at 11.37/KWh.

Teachers unions stonewall school reopening: In his latest piece, CPC contributor Larry Sand highlights the ridiculous lengths teachers unions are going to keep schools closed:

With the availability of vaccines, you might think the unions would back off and embrace a full return to in-person instruction after teachers get inoculated, right? Well, no. As reported by the San Francisco Chronicle’s Jill Tucker, California’s teachers unions maintain that vaccinations alone won’t be enough and are “calling for additional measures not endorsed by public health experts as necessary for students and staff to safely return to the classroom.”

For example, the United Educators of San Francisco is insanely demanding that the district install lids on every toilet, even though none of the millions of cases worldwide has been connected to a toilet….

So what will it take for the unions to get their teachers back to school? Money, of course. Lots and lots of money.

Bill Maher goes after California: When even far-left liberals like comedian Bill Maher start criticizing California’s governance, you know it’s getting bad. During the editorial segment on his show last Friday, Maher called on Californians obsessing over Washington D.C. politics to clean up their own room:

Trump sure didn’t drain any swamps, but when it comes to graft, corruption, and everyone wetting his beak, California — yeah — that’s a swamp too. We can’t put up a housing unit for the homeless for less than 500 grand or build a rail line connecting the state for less than $200 million a mile. Even in France, with all their socialism, they did it for more like $15 million.

California is a blue state that’s completely held together by red tape. It’s no wonder people are leaving in droves. I am in year four of trying to get my solar power hooked up. Just building this shed up to code took three years. We’ll all be getting power from dilithium crystals before my solar gets turned on.

How ’bout this: “Will you hook it up if I let the homeless live in it?

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