The moment of horror that hit Baltimore this year, when officials realized the depth of the city's pension problems, came a full seven years ago for San Diego.
During a 2002 City Council meeting in that Southern California city, a pension board member announced that the city's plan needed more than $1 billion in taxpayer money to stay afloat.
"My heart went down to my toes," recalled April Boling, a certified public accountant in the audience who immediately understood that the retirement system was poised to bankrupt the city. It took a while longer for others to realize the enormousness of the problem, but Boling was later tapped to head a pension reform commission that recommended sweeping changes.
With retirement fund investments tanking as the economy shudders, the San Diego experience of wrestling with a gravely underfunded municipal retirement system is now occurring all over the country. Elected leaders in places like Philadelphia, New Jersey and Baltimore are grappling with ballooning pension contributions, which threaten their ability to operate libraries and recreation centers and provide other services.
Mismanagement of San Diego's fund led to federal indictments and the resignation of a mayor, but new leadership pulled the fund toward solvency. As cities look for solutions, experts point to San Diego as one of the few places where meaningful reform staved off disaster.
"We are not out of the woods," Boling said, noting that stock market declines mean San Diego's pension obligations are once again threatening the city's budget. But the sacrifices made now would be far more severe if the city hadn't acted then, she said.
The most important step San Diego took was pouring hundreds of millions of additional dollars into the pension account - something Baltimore can ill-afford.
Other reforms included ending some benefits, creating a less-generous plan for new employees and adopting more realistic expectations for the return rate on investments. San Diego also reorganized its pension board so members no longer had incentives to hide the health of the fund, a change that some experts say is sorely needed in Baltimore.
Baltimore is looking at those fixes and others as it faces huge funding requirements for police and fire retirees. The public safety pension fund is projected to need a $110 million contribution from the city for the budget year that begins July 2010, an amount city officials say is unaffordable.
