Another Small Step - 401(k) for San Diego City Employees

Apparently the defeat of Proposition D has concentrated the minds of local politicians. Mayor Sanders announced a plan to put new workers into defined contribution plans yesterday. Labor leaders were of course skeptical, but made one comment with which I can agree.

Lorena Gonzalez, head of the San Diego-Imperial Counties Labor Council, said ending pensions for new hires does nothing to solve the city’s current budget crisis. . .

But you have to start reforms somewhere. Further, by changing to a defined contribution plan, the city will stabilize its future costs for pensions. Changes in market conditions won't cause changes to the city's required funding profile. Defined contribution shifts the risks to the employees, which is why the labor unions oppose. However, I am very happy to be in a defined contribution plan at my work. I think it will actually provide far better returns than the defined benefits portion of my plan, so I don't understand why labor leaders oppose it.

Carl DeMaio also pointed out that the plan does not really solve the current pension crisis.

Another Proposition D critic, Councilman Carl DeMaio, said the mayor’s plan is a good first step but doesn’t go far enough. He has proposed ballot measures that would cap the city’s labor costs and freeze salaries to control pension expenses.

“The bandwidth in the public will gravitate toward the plan that actually solves the problem,” DeMaio said. “I’m supportive of the 401(k) for new hires. It’s just that it’s not complete. It falls short of what the city needs ... You have to do a lot more.”

But the momentum is shifting in the debate over pensions and budget woes. It is becoming widely accepted that most of the problems we face with government deficits must be solved through spending cuts, however they are achieved.

The mission of the Tea Party is to hold our politicians' feet to the fire and push for real reform and budget cuts.