"When all costs for retirement benefits are totaled up in city government, they exceed $370 million this year, or roughly two thirds of the city’s entire payroll expense," says San Diego Councilman Carl DeMaio. In other words, of taxes paid by city residents that are spent on personnel, only a third actually support current employees supplying services to residents.
That same problem is going to overwhelm most school districts as well, leading to inability to educate today's school children because nearly all funds to support schools will have to be diverted to pension obligations.
This cost structure cannot be sustained, DeMaio says, and any organization with these excessive costs for retirement benefits would face bankruptcy in short order.
Unless San Diego takes significant actions to mitigate future payments on the unfunded pension liability, the growth rate of these payments is almost certain to outpace the growth rate of tax revenues, he says. All of that will be unpleasant and painful, but there now is no escaping the decisions.
San Diego's current forecast for 2012 through 2016 already shows scores of millions of deficits in every year.
The city’s defined benefit pension payment has climbed from $154 million last year to approximately $230 million this year. And it only gets worse. According to the pension system actuary, it will climb to $343 million in FY 2016 and spike to $511.6 million in FY 2025.
In addition, pension-related health care obligations add another $120 million a year, at current levels.
"To put the magnitude of the pension problem in a more simple perspective, if General Fund revenues grow at a rate of two percent per year, fiscal year 2014 projects the city’s defined benefit pension payment alone to consume more than 20 percent of general fund revenue: one out of every 5 dollars," says DeMaio.
http://www.cleanupcityhall.com/uploaded/FinancialReport.pdf
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