The pension commission is expected to recommend that the city also issue $200 million in pension obligation bonds by the end of 2004.
In all, the commission plans to recommend that the city contribute $600 million over three years, Ms. Boling said, and it expects to recommend the bonds this year because of favorable interest rates.
In the next two years, the commission might recommend that the city use either pension obligation bonds or trust deeds secured by city real estate assets, Ms. Boling said.
Issuing the POBs might be daunting for the city, which was put on watch for a potential downgrade with a negative outlook by Moody's Investors Service in April. The report noted the downgrade was partly due to "questions about the city's financial management and the significant budget deficit the city was likely to face in fiscal 2005 as a result of the potential for significantly increased pension contributions."
Ms. Boling said the commission also agreed to recommend that the city's retirement board be reorganized, a move that would require a ballot measure to change the city charter.
Commission officials would reduce the 13-member board, whose members include employees and retirees, to seven, all of whom would be appointed by the mayor and the City Council, she said.
"They would all have a minimum education or experience in a relevant profession and could not have a vested interest in the plan," Ms. Boling said.
There is disagreement about how the fund got into this position.
"There's been differing opinions on what caused our system's liability," said Paul Barnett, assistant retirement administrator.
According to pension plan officials, the unfunded status is the result of benefit increases and a three-year market slump.
Some San Diego pension officials also differ with committee members on the actuarial formula used to determine the plan's funding level.
Also, some say city and plan officials should merely hold tight and let the plan's investment performance sail them out to calmer waters.
On June 30, 2000, the system was 105% funded, although the Ventura decision, a lawsuit affecting most of California pension plans, combined with a local court action, suddenly changed that number to 97%, Mr. Barnett said. (Under the Ventura decision, the California Supreme Court determined that increased employee pension benefits should be based not only on workers' salaries, but also on items such as car allowances and bonuses.) Both decisions had the effect of increasing the benefits.