San Diego Mayor Proposes Pension Reserve Fund

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San Diego Mayor Kevin Faulconer on Tuesday called for the creation of a pension reserve fund, for the purpose of storing extra cash now to ensure the city’s ability to make full pension contributions in the future.

Faulconer wants to put $21 million in the reserve fund right away – which, at first glance, pales in comparison to the city’s estimated $248 million pension contribution due next year.

But the reserve fund would be designed only to guard against unexpected swings in annual payment amounts, due to investment losses or other problems.

More from the San Diego Union-Tribune:

“This is a policy that guards against fluctuations,” said Faulconer, stressing that the city’s annual pension payment jumped $75 million — from $154 million to $229 million — after the stock market crash of 2008.

Making that larger payment forced the city to cut from other areas back then, including libraries, parks, firefighters and police officers.

“We’ve seen what wild swings can do,” Faulconer said.

Faulconer said creating the reserve is becoming particularly important with the stock market’s recent downturn, because investment losses for the city’s pension fund typically force an increase in its annual pension payment.

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The $21 million proposed for the fund would be equal to 8 percent of the city’s average annual pension payment over the last three years, which was $264.4 million.

More than $16.3 million would come from the general fund, with the remainder coming from other funds such as sewer and water because many employees with pensions work in those areas.

Mary Lewis, the city’s chief financial officer, said the city’s annual payment was scheduled to drop from $254 million in the current fiscal year to $248 million in the fiscal that begins next July. But she said investment losses and other problems seem likely to increase that about $12 million or more.

The City Council will debate the proposal late next week.

 

Photo by TaxCredits.net

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