Planning is underway at San Diego County to let veteran sheriff’s deputies and other public safety employees collect both their salary and their pension simultaneously — a practice that left a trail of controversy at the City of San Diego during its pension scandal in the early 2000s.

That legacy has not impeded county officials from checking off key boxes to creating a deferred retirement option program, known as a DROP, after lobbying from the Deputy Sheriffs’ Association of San Diego County, the powerful labor union for more than 2,000 sheriff’s deputies.

If implemented, it would be the first DROP in California for a county governed by the state’s retirement law for county employees.

With a DROP, participation is voluntary for employees eligible for retirement. Those in the program officially retire but can continue to work for up to five years, with their pension going into a special DROP account. Once they’re off the payroll, the pension system pays the DROP account out to them in a lump sum, along with the normal pension they collect throughout their retirement.

Like supporters of DROP in the past, the deputies union and county officials see it as a tool to retain experienced staff and minimize the upstart cost of hiring their replacements amid ongoing chronic vacancies in their ranks.

But DROPs have faced long-standing criticism as a way for public employees to “double-dip” into public coffers. And at the San Diego Police Department, the mandatory retirement of DROP participants at the end of five years was set to cost the department dozens of experienced officers at a time when it needed to keep staff as vacancies grew.

It’s too early to know how a DROP could impact the county budget in the long term. A county-commissioned analysis predicted that the DROP will reduce overall pension costs.

But that same analysis determined the payroll cost alone of keeping on DROP employees could total $15.5 million in five years and $54.4 million in 10 years, in addition to an estimated $310,000 in new administrative costs for the county’s multibillion-dollar pension system, the San Diego County Employees Retirement Association, or SDCERA.

A potential DROP also comes at a time when SDCERA’s unfunded liability grew from $3.32 billion in 2016 to $5.1 billion last year, according to the system’s financial reports.

Under state retirement law for counties, a DROP has to be “cost-neutral” for the pension system — meaning it can’t increase costs for the system, and it can’t reduce the value of payouts to retirees by more than 3%.

But in practice, the DROP at the city still cost taxpayers tens of millions of dollars all while abiding with how the city interpreted “cost neutrality.”

Officials at the county are looking to balance the uncertainty with the real and existing costs of overtime pay and of training new employees at the Sheriff’s Office.

Between 2019 and 2024, the county averaged $65 million in overtime payments for deputies, and averaged a 10% vacancy rate over a similar period, according to a county actuarial report looking at plans for a DROP.

Supervisor Terra Lawson-Remer has backed the push for a DROP on the Board of Supervisors, arguing it’s a way for the county to save money in the long term.

“A properly designed DROP could save money, not cost it,” said Spencer Katz, Lawson-Remer’s spokesperson. “We’re already incurring significant costs from persistent vacancies: mandatory overtime, recruitment churn and repeated training cycles … DROP could reduce that churn by helping retain experienced staff longer.”

In a statement, Supervisor Joel Anderson said he supports “the great work our deputies do and want to ensure they continue on the job,” though he didn’t indicate a stance on DROP one way or another.

Supervisors Jim Desmond and Monica Montgomery Steppe and the deputies union did not respond to requests for comment.

Legacy of controversy

At the city, its DROP became a lightning rod during its larger pension scandal in the early 2000s.

The city implemented its program in 1997 amid a broader underfunding of the pension system, which eventually tanked the city’s credit rating, grew its deficit and led to resignations of top city officials and federal investigations.

The city ended eligibility for DROP in 2005, but the cost was already ensured to reverberate for years to come.

In 2016, a report estimated that DROP will ultimately have cost the city $149 million, a price tag set to be spread out over decades.

At the city, a high number of employees on DROP went on workers’ compensation, with money still being deposited into their DROP accounts even though they weren’t working. Hundreds of other DROP participants returned to city jobs as provisional employees.

In Los Angeles, a number of public safety employees abused the DROP system, with half of all participants taking injury leaves, some for faked injuries, that allowed them to pad out their DROP accounts even though they weren’t working, according to a 2018 Los Angeles Times report.

A $200,000 report commissioned by the county with actuarial firm Foster & Foster identified San Diego’s DROP as a cautionary tale and urged officials to prevent loopholes as its DROP moves forward.

“Others may arise over time and must be dealt with swiftly to ensure the program works as intended,” the report said.

Ball rolling

The county’s foray into starting a DROP traces back to late 2023, after the deputies union urged elected officials to adapt a DROP to remedy chronic staffing shortages amid a mandatory overtime policy at the Sheriff’s Office.

That year, the county hired Foster & Foster to draft a DROP plan that complied with the cost-neutrality rules required by state statute.

Supervisors backed the study of a DROP on a unanimous vote.

To reach that standard, the firm’s recommendation called for the county’s DROP to include elements that minimize the cost of DROPs.

Those include not letting DROP accounts accrue any interest over time — a component that’s not a part of the city’s DROP.

Other elements include depositing only 75% of participants’ pension contributions into DROP accounts and capping cost-of-living adjustments for money going into the account.

All of those recommendations are part of agreements finalized in May between the county and labor unions for deputies, probation officers and supervisors, and District Attorney’s Office investigators.

The county still has some final moves to make before its DROP becomes official.

The Board of Supervisors still has to pass an ordinance detailing the terms of the DROP. If that’s passed, SDCERA, which administers the pension system, has to make its own finding the program will be “cost-neutral” for the system.

Once started, that process could take several months, said pension system CEO Tracy Sandoval.