Management & Labor

Taming of a Deficit

San Diego just closed an $83 million hole in its budget and is looking at a shortfall conservatively estimated at $115 million next year. For a place...
by | July 31, 2009

San Diego just closed an $83 million hole in its budget and is looking at a shortfall conservatively estimated at $115 million next year. For a place such as San Diego, that's practically good news.

Five years ago, San Diego was dubbed "Enron by the Sea" because of its pension scandal, which led to the resignation of Mayor Dick Murphy and triggered multiple federal investigations. Since that time, the city has cleaned up much of its act. But perennial deficits remain.

Mayor Jerry Sanders, who was first elected in a 2005 special election, has taken a number of important steps towards stabilizing the city's fiscal condition. He helped end some of the city's worst practices, through changes in management methods and ordinances he's put before voters. Most recently, he's extracted labor concessions that led to a 6 percent pay and benefit cut for city employees and instituted a much-reduced pension package for new hires. Equally important, the pension board, which once was a nest of feather-bedders, now is governed by a majority of trustees who do not have direct conflicts of interest.

After years of illegal quid pro quos, the board began making the right calls when it came to simple things such as funding long-term obligations. Fear of indictments had become a big motivator, as had complaints from the Internal Revenue Service. "They were not unknown deficiencies," says Bill Sheffler, a former trustee, "but having the IRS affirm them gave the board the political basis to change things."

Now, the city's finances are much more stable. San Diego is welcome again in the bond markets, after being banned due to shady bookkeeping. At the same time, however, the city's pension deficit is as high as it's ever been and its maintenance backlog remains enormous. And San Diego remains unwilling to raise taxes or even charge for garbage collection to come up with the dollars to remedy its structural deficit. "We're making headway," says Andrea Tevlin, the city's independent budget analyst, "but we still have a long way to go."

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