San Francisco Pension Reform, Propositions C and D (November 2011)
Proposition D is supported by Jeff Adachi. Proposition C is a rival measure supported by Mayor Ed Lee and several San Francisco County superintendents. Proposition D will save the city $50 million more a year than Proposition C.
Since Adachi and current San Francisco mayor Lee are both running for mayor and have differing views on pension reform, it has become a key issue in the November 8, 2011 mayoral contest in the city.
If both propositions receive a majority vote, the one with the most votes will go into effect. However, any parts of the measure that receives the smaller majority vote that are not in conflict with any parts of the measure that receives the larger majority vote will also take effect.
San Francisco's pension costs
- Pension costs paid to retired city workers will be about $423 million in 2011, at a time when San Francisco is facing an annual deficit of about $400 million.
- The $423 million in pension costs in 2011 is about $109 million more than the pension costs in 2010.
- The unfunded pension liability in the city is about $35,000 for every household.
- "The pension investment fund took a $4 billion hit [in 2008], and The City was forced to start contributing hundreds of millions of dollars to pension costs using its annual revenues that pay for basic services such as police, fire, parks and roads."
- Projections indicate that pension costs will double to about $800 million in 2014, or about 31% of the city's payroll.
- According to Gabriel Metcalf, executive director of the San Francisco Planning and Urban Research Association, "Many factors caused us to be in this [pension] mess. It’s been incredibly tempting for a succession of elected officials to offer very rich pension benefits to city employees."
- Some retired city workers are receiving pension benefits of $22,600/month, which comes $271,200/year.
- 7,266 retired city workers are receiving monthly checks between $2,000 and $4,999.
- More than 600 retired workers receive more than $108,000/year in retirement benefits.
Proposition C is supported by Mayor Ed Lee, Supervisor Sean Elsbernd, and labor unions in the city.
Path to the ballot
Proposition D (the "Adachi Initiative")
Proposition D will require city workers to contribute more to their own pension costs.
Arguments in favor
Arguments made in favor of Proposition D include:
- "The spiraling, unsustainable costs of [retirement and health benefits for city employees] will require massive cuts in city services and the elimination of city jobs."
- "The cost of pension and health care benefits for the City’s 26,000 employees and 28,000 retirees and their 47,000 dependents now consumes one out of every seven tax dollars."
- "In the next five years the cost will consume one out of every four dollars. Within five years, these costs are projected to rise to $1 billion annually. At that level, San Francisco could entirely eliminate the Police Department, Fire Department, Sherriff’s Department, District Attorney’s Office, and the Juvenile and Adult Probation Departments and still not have enough money to cover its pension and health care liabilities."
- "Even assuming optimistic rates of return, San Francisco is unlikely to meet its pension obligations to retirees. If the pension fund collects a generous 7.75% return on its investment each and every year, there is still a 67% chance that it will fail to provide the pension benefits that city employees and retirees are counting on."
- "Without significant changes in policy, there is a zero probability that San Francisco will be able to meet its health care obligations to retirees."
- "San Francisco currently has $4.364 billion in unfunded health care obligations. In other words, there are over $4 billion in health care benefits that city employees are expecting to receive but that the city — despite its promises — literally cannot afford to provide."
- "Every year the city increases its spending on retiree health care. Since 2000, San Francisco’s expenditures for retiree health care have increased by more than 500%, from $23 million to $156 million. Despite that, the city’s unfunded liability is growing. By the city’s own admission, by 2028 it will be $9.5 billion short of paying the retiree health care costs that city employees are counting."
- "If City employees don’t begin contributing more towards their pensions, the City will go broke, and this will lead to more layoffs of City employees. This year, with a $379 million deficit, City employees are facing a large number of layoffs, which in turn, will weaken the pension system, since there will be fewer people contributing to it. If the pension system continues to lose more value, it too will eventually collapse and City workers won’t get their promised pensions."
San Francisco County Supervisor Sean Elsbernd believes that even if voters prefer Proposition D, the courts in California won't allow it, whereas (Elsbernd believes) the courts in California will allow Proposition C. Elsbernd says: "We believe we have pushed the legal limits (of pension reform) as far as they can be pushed, and Jeff has far exceeded anything that California courts have allowed."
Path to the ballot
As an initiated city charter amendment, Proposition D required 46,559 signatures on petitions to qualify for the ballot. Its supporters submitted 72,640 signatures on July 11. This was 26,000 more signatures than were required.
A July 19, 2011 report by the San Francisco City Controller said that over 10 years:
- Proposition C would save the city $1.29 billion
- Proposition D would save the city $1.6 billion.
- SF Pension Reform, website supporting Proposition D
- Text of Proposition C
- Text of Proposition D, the Adachi Initiative
- San Francisco Examiner, "Adachi submits ballot measure to reform San Francisco's pension system", July 11, 2011
- Beyond Chron, "Adachi’s Entry, Debate Hecklers Boost Mayor Lee’s Campaign", August 15, 2011
- San Francisco Chronicle, "Sean Elsbernd: It’s one or the other on pension reform", July 12, 2011
- SF Weekly, "San Francisco’s Pension Contribution will Be Far More Than Reported"
- San Francisco Examiner, "San Francisco's public pension system is drowning in red ink", August 14, 2011
- Mercury News, "SF supes place pension reform measure on ballot", July 20, 2011
- San Francisco Chronicle, "Jeff Adachi’s pension measure gets almost 73,000 signatures", July 11, 2011