Monday, February 5, 2007
One major campaign promise that Mayor Jerry Sanders has not yet fulfilled is to close San Diego's debt-ridden pension system to new hires and replace it with a 401(k)-style retirement plan such as most private-sector workers have. This proposed shift faces vociferous opposition from City Hall's powerful public employee unions. But a poll just released by the new San Diego Institute for Policy Research shows that San Diegans generally support the idea of giving municipal workers the same kind of pension plan that prevails in the private workplace.
The reason San Diego is wracked by financial upheaval is that the pension plan guarantees city workers exorbitant retirement checks – up to 140 percent of their highest-year salaries. Regardless of the ups and downs of the stock market or other investments, taxpayers must pony up whatever it takes to pay these benefits, which are protected by state and federal law, as City Attorney Mike Aguirre has belatedly discovered.
Such so-called “defined benefit” plans became obsolete in the private sector decades ago. They were supplanted by so-called “defined contribution” plans, under which a worker and his employer both contribute to an individual investment account. The funds accumulated in the account belong to the worker, and he can take his account with him to another job or leave it to his heirs when he dies. He controls the account and in most cases can determine, within limits, how it is invested.
The survey conducted by the Institute for Policy Research shows that 50 percent of San Diegans support shifting city workers to this sort of 401(k)-style plan. Among San Diegans who themselves rely on a defined contribution plan, support for the shift jumps to 65 percent. Only 37 percent of San Diegans support keeping the current defined benefit plan.
These findings should spur Mayor Sanders and the City Council to action. The sooner San Diego moves to a defined contribution plan for municipal workers, the sooner San Diego will recover its financial well-being.