Opinion: San Diego literally can’t afford to ignore pension reform

For years, San Diego taxpayers were told that pension reform was a fiscal necessity. And for good reason: Rising retirement costs had begun to crowd out funding for libraries, road repair, police and core city services. In 2012, voters approved Proposition B, which closed the city’s defined-benefit pension to new hires (except police) and moved most new employees to 401(k)-style retirement accounts. At the time, it was seen as a turning point toward sustainability.

Unfortunately, that reform has been reversed. In 2021, California courts invalidated Proposition B on procedural grounds — because the city had not met and conferred with labor unions before placing it on the ballot. Now, thousands of employees hired under the reform after its passage can opt back into the city’s pension system, with retroactive benefits. The result: We are back to square one — only now the numbers are worse.

Unfortunately, under the “California rule” upheld by state and federal courts, pension benefits can only be changed for new hires. This court logic is bizarre and should be challenged. Why aren’t pension benefit formulas for future benefits up for negotiation with each new round of collective bargaining? They aren’t inviolate in the corporate world. But challenges to the “California rule” have never won any significant changes.

According to the city’s latest financial reports, San Diego faces an unfunded pension liability of $3.3 billion, and that number is growing. In the coming fiscal year, the city will contribute roughly $490 million to the pension system. That’s more than triple what the city paid just two decades ago. And it’s projected to increase further — before a single pothole is filled or police officer is hired.

Meanwhile, the city also faces a retiree health care liability of $1.3 billion. Although the city stopped offering these benefits to new hires after 2005, it still pays about $43 million per year, funded on a pay-as-you-go basis — well below what would be needed to cover long-term costs.

These are not abstract figures. Every dollar consumed by pension obligations is a dollar that doesn’t go toward basic services. That means fewer firefighters, longer wait times for 911 calls, deferred infrastructure repairs, and cutbacks to libraries and parks. In short, as pension costs rise, San Diegans are being asked to accept a lower quality of life.

The core problem is that the city has made generous retirement promises without fully paying for them. Today’s taxpayers — and tomorrow’s — are left to foot the bill for decisions made decades ago.

San Diego needs to restart the conversation about retirement reform. This is not about punishing workers or breaking promises. It’s about ensuring the city has the resources to meet today’s needs while responsibly managing long-term obligations. Other cities have successfully negotiated hybrid systems or capped pensionable pay for new hires — options that are legally sound and financially prudent.

We also need more transparency. Taxpayers deserve to know how much of their annual property taxes and fees are going directly into pension payments. The city should report pension and retiree health care costs not just as line items in the budget, but as a percentage of general fund spending — so residents can see, year over year, how much is being diverted from services.

In 2012, San Diegans overwhelmingly voted for reform because they understood that pension costs were threatening the city’s future. Today, the threat remains — and is bigger than before. City leaders should stop treating pension reform as a closed chapter. It’s time to bring it back to the top of the agenda.

Roach is a software executive and resident of Point Loma.