San Francisco Pension Reform, Proposition B (November 2010)
The Adachi Initiative would require police, firefighters and other city employees covered by CalPERS to contribute 10% of their pension contribution. These employees currently contribute either 7.5% or 9%, depending on when they were hired. The maximum amount that could come out of an individual worker's paycheck toward his or her pension contribution would be 2.5%.
Other city employees, who currently contribute 7.5%, would contribute 9%. Muni workers, who currently contribute nothing, would have to start paying into the system as other city workers do, under the Adachi proposal. The initiative would also require city employees to pay for 50%, rather than 25%, of their family's health care coverage.
Jeff Adachi, San Francisco's elected public defender, is the leading force behind the ballot initiative. He says that the measure, if enacted by voters, will save the city $167 million per year. Adachi says he is motivated to support the measure because "There's a fiscal train wreck just around the corner, as these pension costs are flying through the roof." Adachi also says that the way the current pension system is designed, ""It's like going to Vegas with your brother-in-law's paycheck."
On August 10, several public employee unions filed a lawsuit in San Francisco Superior Court to try to remove Proposition B from the November ballot.
Pension costs as motivation
When the economy was booming, San Francisco's pension liability was largely covered by investment returns. That is no longer the case. In 2010, the city is expected to have to contribute (according to different estimates) between $300 and $575 million to pension costs directly from its general operating budget. The amount of the required direct contribution from city coffers is expected to go as high as $600 million by 2015 if nothing changes. This pressure on the city's general operating budget from contributions to pensions means that there is less money available for all the other services provided by the city.
The overall cost of the pension system to San Francisco taxpayers tops $1.2 billion a year.
John Diaz of the San Francisco Chronicle, commenting in July on the Adachi pension reform measure, wrote:
- "But the crisis over escalating pension and health care costs that has been brewing for years - and ignored by all but a few lonely fiscal conservatives - has reached the breaking point...'This is like the dot-com bubble bursting,' said Susan Kennedy, chief of staff to Gov. Arnold Schwarzenegger."
Adachi says of his initiative, "This isn't an attack on labor. It's a math problem."
Meaning of a "yes" vote
According to election officials, voters who vote "yes" on Proposition B want to:
- Increase employee contributions to the Retirement System for retirement benefits,
- Decrease employer contributions to the Health Service System for health benefits for
employees, retirees and their dependents,
- Change rules for arbitration proceedings about City collective bargaining agreements, and
- Prohibit any increase in employee compensation for affected City employees for five years if a court invalidates any part of this measure.
Meaning of a "no" vote
According to election officials, voters who vote "no" on Proposition B want to leave the city's charter as is, and make none of the proposed changes to the city's pension system.
Adachi describes the pension reform initiative
Michael Moritz of Sequoia Capital and his wife, novelist Harriet Heyman, gave $245,000 to the campaign to enable it to collect the approximately 76,000 signatures that were submitted to qualify the measure for the ballot. Moritz, described as an "iconic Silicon Valley figure", was an early investor in Google, Yahoo and YouTube.
Investor Ronald Conway and David Crane, an advisor to Gov. Arnold Schwarzenegger have each given $10,000 to the ballot measure campaign.
Organized labor in San Francisco is up in arms about the Adachi measure. Tom O'Connor, president of San Francisco's firefighters union, says, "He's looking to kick city workers when they're down. City workers already have been giving back. The central problem with Adachi's measure is that he's not working with city employees to solve a problem, but demonizing them when the real problem is Wall Street."
Chris Daly, a member of the San Francisco Board of Supervisors, is reported (by the San Francisco Chronicle) to have threatened to introduce a motion to cut $1.2 million from the budget of the Office of the San Francisco Public Defender, possibly in retaliation for Adachi's initiative.
According to Randy Shaw, editor of BeyondChron, "This initiative will dominate San Francisco’s November ballot, and be framed by the national media as a litmus test for plans to cut local and state employee pensions across the country."
Path to the ballot
- See also: Petition blocking
On August 10, Kathern Alba-Swanson, Elvira James, Blue Walcer, Ron Dicks, Maria Guillen, San Francisco Firefighters Local 798, International Federation of Professional & Technical Engineers Local 21, SEIU Local 1021, San Francisco Municipal Executives' Association and the San Francisco Police Officers Association filed a lawsuit in San Francisco Superior Court to try to remove Proposition B from the November ballot. San Francisco Superior Court Judge Harold Kahn ruled against the plaintiffs, and said that Proposition B can stay on the ballot, on August 30. However, the judge did agree with the motion of plaintiffs to remove one specific part, Section 1, from Proposition B.
The lawsuit was filed against San Francisco election chief John Arntz in his official capacity and also against Jeff Adachi and Craig Weber as "real parties in interest". Craig Weber is an accountant who served on the San Francisco Grand Jury on pension reform for two years. He is also the treasurer of the Adachi Initiative "Yes on B" campaign.
Claims in lawsuit
The 60-page complaint filed to open the lawsuit made a variety of claims. It said:
- Proposition B, if enacted, will violate the employees' contractual rights to their benefits.
- The petitions used to gather signatures for the measure were misleading and violated state election law.
- The petition form that was circulated did not include a "notice of intention document".
- The petition that was circulated did not mention Craig Weber. 
- The petition that was circulated did not include the entire text of the proposed legislation.
- Circulators who sought signatures on the petition misrepresented the nature of the proposed legislation to voters, using phrases such as "save the schools," "help the poor," “patch pot holes,” and “help poor people." Potential petition signers who asked for a copy of the text of the measure were not given a copy of the text of the measure and were instead presented with a political flyer.
- Proposition B violates the single-subject rule.
- According to a press release issued by one of the plaintiffs in the lawsuit, "California’s constitution protects vested retirement security rights as it recognizes the contractual rights of employees once they have reached retirement and are receiving benefits. The Adachi/Weber measure takes awy those rights without providing anything in return. In essence, in circulating their unlawful petition, Adachi and Weber are interfering with the constitutional rights of employees who worked their whole lives for the City of San Francisco under certain expectations relating to their retirement security."
- The same press release additionally says, "...the Adachi/Weber measure unlawfully violates City employees’ constitutionally protected right to due process. Hidden within this poorly drafted measure lurks a 'poison pill' which states that if a City employee succeeds in a legal challenge against the measure after enactment, rather than celebrating a legal victory, City employees instead would face a five year cap on compensation. This provision is both poor public policy and radically unconstitutional, as all citizens of California have a constitutionally protected right to seek court redress for unlawful legislation."
Response of Prop B supporters
The "Yes on B" campaign disputed every assertion in the lawsuit. A spokesperson said, "Every step to get this measure on the ballot in November was followed and sanctified by The City Attorney, the Department of Elections and the over 77,000 people of San Francisco who signed the petition. Measure B is about pension reform and enabling the city to develop an independent funding stream so that we are not reliant upon one-time, quick fixes in order to fill escalating budget deficits, preserve vital city services and protect jobs."
Section 1 removed
Judge Kahn's August 30 decision removed one part, Section 1, of Proposition B.
Section 1 would have frozen workers' wage and benefit levels for five years if these two conditions had been in effect:
- If Proposition B passed
- If any part of Proposition B was successfully challenged in court.
Judge Kahn's ruling said that this section of Proposition B was "draconian." He wrote:
- "By eliminating five years of bargained compensation increases if any portion of Proposition B is invalidated, the poison pill may discourage potentially meritorious challenges to Proposition B ...[posing an] impermissible burden on the constitutional rights of City employees to seek redress from the courts."
A question arose about whether the San Francisco Sheriff's Department should be allowed to provide ballot security for this election. Traditionally, the Sheriff's Department is in charge of ballot security for San Francisco elections. Deputy sheriffs pick up ballots and voter memory cards from polling stations, transporting the ballots to the warehouse on Pier 48 and the memory cards to City Hall. About 100 deputy sheriffs are involved in the ballot protection operation.
Since the personal income of the deputies who would provide the ballot security is impacted by the outcome of the vote on Proposition B, the San Francisco Ethics Commission felt that it would be expedient and prudent to decide whether deputies should be allowed their traditional security role. When the Ethics Commission met, they decided to go forward with the traditional system, rather than outsourcing ballot security to a private contractor.
- SF Smart Reform
- Full text of the Adachi Initiative
- Meeting archives for approval of ballot language on Proposition B
- Text of Proposition B
- List of local San Francisco ballot measures on the November 2, 2010 ballot
- Fog City Journal, "Adachi Pension, Healthcare Reform Measure Qualifies for November Ballot", August 2, 2010
- "Local ballot measure campaigns reach the finish line", July 6, 2010
- San Francisco Chronicle, "On the Growing Movement for Pension Reform", July 11, 2010
- San Francisco Chronicle, "Pension petition deadline looms", June 28, 2010
- Bay Citizen, "SF Unions Sue to Halt Pension Measure", August 11, 2010
- KTVU, "Measure Would Force SF Workers To Pay Into Pension Fund", June 19, 2010
- San Francisco Chronicle, "Adachi makes enemies, sense with labor proposal", July 10, 2010
- Wall Street Journal, "San Francisco Budget Woes? Super VC Moritz To The Rescue", July 7, 2010
- BeyondChron, "Adachi Pension Measure Could Reshape National Politics", July 7, 2010
- San Francisco Appeal, "Adachi Taps Venture Capital, Slaps Labor With Delivery of 76k Signatures", July 6, 2010
- San Francisco Weekly, "Key Portion of 'SF Smart Reform' Prop. B Struck Down by Judge", August 30, 2010
- Text of Alba-Swanson v. John Arntz
- Associated Press, "Suit seeks to block SF pension ballot measure", August 11, 2010
- Fog City Journal, "Labor Unions File Suit Against Adachi Pension", August 11, 2010
- San Francisco Examiner, "Ballot creates security fray", August 24, 2010