SAN DIEGO — The city of San Diego’s budget for the next fiscal year took a $12 million hit Friday when the governing board of the employee pension system approved a move that ups the city’s contribution to its workers’ retirements.
It also means the city will have to bump up the annual contribution it makes on behalf of employees next year — and future years in which the lower discount rate is in effect.
“This was a carefully considered decision for the Board of Administration to make, as we understand the impact it will have on our members and on our plan sponsors,” stated board President Ed Kitrosser. “The adjustment is a prudent, fiscally conservative risk-reduction measure, designed to protect the long-term health of the system and safeguard system assets that pay vested benefits of our members.”
Gene Kalwarski, the principal consulting actuary to SDCERS, said economic downturns over the past decade have taught pension plan officials that they had to manage their risk.
The discount rate had been 8 percent for decades until it was lowered a couple of times beginning in 2008, according to SDCERS.
Interim Mayor Todd Gloria said the latest change will result in a net increase of $12 million in the budget. The total tab of $14 million will be partially offset by a five-year labor agreement reached earlier this year.
“While the decision reduces risk for SDCERS, I would have preferred having those funds for needed neighborhood services,” Gloria said. “I will factor this reality into the Five-Year Financial Outlook, which I will release on Nov. 14.”
Gloria told City News Service recently that it appears San Diego will have enough money to provide the same level of basic services in the next few years. However, it’s unclear how much funding would be available to pay for increases called for by the City Council and mayoral candidates.
The SDCERS decision means less cash will be around to pay for service improvements.
It’s the second time recently that the pension board has negatively impacted the city budget. City officials touted tens of millions of dollars in savings from the five-year labor deal, but SDCERS failed to include the new calculations in time for the current fiscal year.
SDCERS also runs the pension system for the Port of San Diego and the San Diego County Regional Airport Authority, so those agencies will have to fork over higher contributions as well.