A San Diego Retirement
Wall Street Journal (2008-09-06) Editorial Staff
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, Local Politics
September 6, 2008; Page A10
Unfunded public employee pensions are a crisis waiting to erupt across the country, so a political brawl in San Diego is worth watching. In a welcome change, a public official is looking out for taxpayers rather than for unionized public workers.
San Diego first disclosed huge funding shortfalls in its public pension plan six years ago. Officials have since been charged with fraud by the SEC, the city has had its bond rating slashed, and both the IRS and the SEC have demanded changes in the way the city's pensions are administered. Yet the generous pension benefits that were handed out by the derelict politicians and triggered the crisis remain in place -- a billion-dollar liability hanging over city taxpayers for decades to come.
This summer, San Diego's mayor succeeded in negotiating a reduction in retirement benefits for city employees -- but only for new hires, starting in 2009. The deal left the benefits negotiated in 1996 and 2002 untouched, and both city politicians and unions say those bennies are "sacrosanct." They include 50,000 years of pension credit for time not served that the city all but gave away, as well as a provision that allowed employees to take early retirement and a deferred-retirement program at the same time.
San Diego's contributions to the pension fund have quadrupled in recent years, and the fund is still $1.2 billion in the hole. California state law caps property tax levies. So San Diego has paid for the increased contributions by deferring road maintenance, and skimping on library funding and municipal recreation programs. And the city is still falling further behind.
The garden at this skunk party is City Attorney Michael Aguirre
, who has made himself very unpopular with the political establishment by suing to rescind the 1996 and 2002 pension promises. Though a liberal Democrat normally sympathetic to unions, he says the benefits were granted as part of "the largest municipal securities fraud in American history," and so taxpayers shouldn't have to honor them.
As for the mayor's recent deal on future benefits, Mr. Aguirre says "that might save us $22 million 40 years from now." By contrast, he figures he can shave $900 million off the $1.2 billion deficit if he prevails in court. His case was tossed out of trial court but is now under appeal.
The battle has been so contentious that one member of the City Council and a local judge both attempted to unseat Mr. Aguirre in a primary earlier this year. Judge Jan Goldsmith won the primary, but Mr. Aguirre, who came in second, will get a rematch in November's runoff. Mr. Aguirre, who used to represent victims of Ponzi schemes in private practice, says these pension giveaways are the same beast. "But unlike most Ponzi schemes, this one is financed with taxpayer dollars," he says.
The same goes for elsewhere around the country, where politicians have also padded pensions to buy union support, knowing that the bills will come due long after they've left office. In New York state, Albany has been granting expensive retirement benefits for years on the basis of cost estimates prepared by a actuary being paid by the same unions who stand to benefit from the increases. And in New Jersey, state lawmakers shortchanged the public pension funds in the 1990s by rewriting the accounting rules to make it look like they were fully funded.
Taxpayers in those states need a rabble-rouser like Mr. Aguirre willing to stand up to union interests. The San Diego attorney faces a tough re-election battle in November, but he's setting off an alarm that voters across America need to hear.
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