San Diego spending $100K for estimate of how costly pension ruling could be

By By David Garrick, The San Diego Union-Tribune

San Diego is paying a consultant $100,000 to analyze the potential costs of a state Supreme Court ruling in August that the city’s six-year-old pension cutbacks were not legally placed on the ballot.

While getting an estimate of its liability makes sense for the city from a financial perspective, the analysis could also serve as a starting point for negotiations with labor unions over a potential settlement of the case.

The results of the analysis might also help the City Council decide whether to pursue a potential appeal of the state Supreme Court ruling to the U.S. Supreme Court on free speech grounds.

City Attorney Mara Elliott made it clear an appeal to the U.S. Supreme Court was an option she’s considering when she recently asked the state Supreme Court to re-hear the case, a necessary formality before a federal appeal can be filed.

The analysis will give the city a better idea of how much money it will cost to compensate the roughly 4,000 employees hired since 2012 without pensions.

The city’s pension reform measure, which was approved by more than 65 percent of city voters in 2012, replaced guaranteed pensions with 401(k)-style retirement plans for all newly hired city employees except police officers.

San Diego is the only city in California to discontinue traditional pensions for new hires.

Previous estimates have put the city’s liability somewhere between $20 million and $100 million, but those estimates have been far from precise because of uncertainty about how the case will be resolved.

The state Supreme Court in August reinstated a 2015 decision by the state labor board that San Diego must make employees hired since 2012 whole by compensating them for the loss of pensions and paying them interest penalties of 7 percent.

The new analysis will include an estimate of how much that will cost, but it could also help the city launch negotiations with the labor unions who filed suit claiming the pension measure was placed on the ballot illegally.

“Immediate action is necessary to ensure that the appropriate resources are available to support the city in any negotiations resulting from the recent Proposition B decision,” Julio Canizal, the city’s risk management director, said in an Aug. 29 memo about the new analysis.

Mike Zucchet, leader of the city’s largest labor union, said by phone that labor leaders are open to negotiating a settlement with the city.

“We’re encouraging the city to work with us on a remedy, which is the next stage in the litigation unless one of these rehearing attempts are granted,” he said. “We want to get to the table as soon as possible.”

Zucchet said the new actuarial study seems like an attempt to spur negotiations because it will allow city officials to show labor leaders a number that could be used as a starting point for discussions.

“Our understanding is the city is taking steps to gather information and assess actuarially the impacts of potential outcomes,” he said.

Negotiations would likely focus on two main issues: how to compensate employees hired since 2012 without pensions and how to handle new city hires moving forward.

Zucchet said, however, that it would be difficult to launch negotiations while the city is still pursuing legal action, particularly the potential appeal to the U.S. Supreme Court.

“It’s difficult for the city to both litigate and negotiate at the same time,” he said. “We’re open to anything, but I just don’t know how that works.”

An appeal to the U.S. Supreme Court couldn’t happen unless Elliott gets permission from the City Council to pursue that route.

Gerry Braun, Elliott’s chief of staff, said by phone that Elliott hasn’t yet scheduled a time to discuss the matter with the council because she must wait for the state Supreme Court to deny her request for re-hearing of its August decision.

The deadline for the state Supreme Court to rule on her re-hearing request is Oct. 31.

Braun said it isn’t necessarily Elliott’s goal to appeal the ruling to the U.S. Supreme Court, but that she filed the request for re-hearing to preserve the city’s right to pursue that route if the council chooses.

Free speech is a potential issue in the case because the state Supreme Court ruled the pension cuts were illegally placed on the ballot based on actions by then-Mayor Jerry Sanders.

The court ruled unanimously that Sanders was obligated to meet with the unions for negotiations before placing the measure on the ballot because he used his power and influence as mayor to support the measure.

The city argued that Sanders supported the measure only as a citizen, not as mayor, and therefore negotiations with unions weren’t required.

Attorneys for the city could argue Sanders was exercising his free speech rights when he was supporting the measure, which would make it a federal case that the U.S. Supreme Court could consider.

This article provided by NewsEdge.