San Diego’s pension crisis just hit a staggering new low—and it’s four times worse than anyone anticipated. Brace yourself: the city’s annual pension payment has skyrocketed to a record-breaking $563.2 million, thanks to employee pay raises that far exceeded expectations. But here’s where it gets controversial: while the stock market soared and pension investments gained $89.2 million, those gains were completely overshadowed by salary hikes that added over $140 million in long-term liabilities. How did we get here? Let’s break it down.
The city’s actuary, Gene Kalwarski, initially predicted a modest $7 million increase in pension payments this year—from $533.2 million to $540.1 million. But in a shocking twist, he revised that estimate upward by a whopping $30 million this week. And this is the part most people miss: this isn’t an isolated incident. For the past seven years, San Diego has consistently approved pay raises larger than Kalwarski’s projections, creating a recurring financial headache for the pension system.
City officials argue these raises are necessary to offset a wage freeze from 2013 to 2018, claiming San Diego’s municipal salaries lagged behind other cities. The numbers? The average city employee salary jumped 7.4% to $113,800 this year, with general employees receiving 5% raises, police and lifeguards 4%, and firefighters 3% (plus an additional 1% in January). These increases come on top of automatic pay hikes tied to years of service—a double whammy for the pension system.
Here’s the kicker: despite the city’s unfunded pension debt shrinking slightly (from $3.49 billion to $3.46 billion), the payment spike still happened. Why? Kalwarski expected the debt to drop by $131 million, but it only fell by $27.9 million—a fraction of what was anticipated. On the bright side, the pension system’s funded rate climbed to 76.1%, the highest since 2008. But is that enough to offset the pain?
Looking ahead, Kalwarski predicts payments will rise again next year to $573.2 million before dropping to around $500 million from 2029 to 2033. Yet, even that $500 million mark is a recent phenomenon—last year was the first time it was ever crossed. And here’s the real gut punch: the general fund, already facing a $110 million deficit, will shoulder about $410 million of this pension burden, up from $383 million. That deficit? It’s likely an understatement, as the city recently announced an additional $23 million shortfall for the current fiscal year.
Is San Diego’s approach to pay raises sustainable, or is it digging the pension system into an even deeper hole? City officials insist it’s a necessary correction, but critics argue it’s a risky gamble with long-term finances. What do you think? Are these raises justified, or is the city biting off more than it can chew? Let’s hear your thoughts in the comments—this debate is far from over.
