San Diego city councilmember Carl DeMaio says he was shocked when he saw some of the payments made to retired city employees, so shocked he thought it was a joke. It wasn’t.
On Tuesday, February 11, in a crowded press room on the 13th floor of the City Hall building, just hours after Mayor Sanders announced a two-billion-dollar deficit in the city’s pension fund, Councilmember DeMaio revealed the shocking numbers to the public as part of the third report on the excesses of the city’s labor and retirement benefit program.
Titled “The Million Dollar Circle,” the report issued by DeMaio’s office discloses payouts to five retiring city employees in 2008 in excess of a million dollars. The report also uncovers 86 instances of pension allowances during 2008 that were over six figures.
“The figures we are about to show will likely outrage the average taxpayer,” said DeMaio from the podium.
“A total of 1774 city employees have a cash value of $333 million dollars in funds sitting in the pension system in DROP accounts, all earning — during this down market — a guaranteed, risk-free 7.75 percent rate of return.”
It’s not just the lump-sum payouts that have DeMaio outraged; it’s also the “double dipping” going on by many high-level city employees enrolled in the Deferred Retirement Option Program (DROP).
“The DROP program allows employees to ‘double dip’ [and] bank retirement payouts at 8 percent compound interest for five years. All the while, they continue to draw their city salaries.”
According to the report, immoderate payouts have caused the city’s pension deficit to skyrocket by 1475 percent since 1998.
As a temporary fix, DeMaio called on San Diego’s Pension Board to drop the guaranteed interest rate of 7.75 percent down to 4 percent at their February 20 meeting.
“This item is on the agenda for consideration by the pension board, and I hope they are listening.”
DeMaio estimates that such a reform would save taxpayers $3.5 million in 2011 and reduce pension liability by 250 million dollars.
When asked if DeMaio participates in the DROP program he said he was embaraased to participate. By not enrolling, DeMaio says he saved $28,500 from his office budget and used the extra funds to pay for an additional constituent service representative.
Closing out the press conference, DeMaio reiterated his disgust with the excessive benefit payouts. “They are a few people at the top of this Ponzi Scheme, and I use that term decidedly, who are able to be part of that million dollar circle. And because eof those excesses the retirement security of every employee is threatened.”
To find out some of the elected officials that double dipped, go to Councilmember DeMaio’s website at sandiego.gov/citycouncil/cd5.