Progressive pension reform

Under Mayors Willie Brown and Gavin Newsom, the city used its flush pension fund as a way to avoid tough decisions on employee pay

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EDITORIAL It's entirely possible that San Francisco voters will see three different pension proposals on the November ballot. Public Defender Jeff Adachi, who failed to pass a harsh pension-reform plan last year, is determined to try again. A working group headed by investment banker Warren Hellman is working on a plan, and Sup. Sean Elsbernd expects some version of that to move forward. And organized labor may do its own initiative.

But before any of those efforts are finalized, it's worth understanding where this so-called crisis originated — and how to fashion a progressive approach to the issue.

The idea behind San Francisco's fixed-benefit system is simple. Every year, the city and it's employees contribute to a pension fund, which is invested under strict rules, and when an employee retires, he or she gets paid a predetermined amount out of that fund. Until the financial system imploded and the stock market crashed in 2008, San Francisco's pension fund was solid. The reserves more than covered expected payouts. In fact, the fund was so healthy, and growing so fast, that some years the city didn't have to contribute anything at all.

Under Mayors Willie Brown and Gavin Newsom, the city used its flush pension fund as a way to avoid tough decisions on employee pay. Instead of giving raises, for example, the city offered to pick up the contributions some workers were making to the fund (which would cost the city nothing as long as the stock market kept booming).

Now things aren't so rosy, and the city's having to put hundreds of millions a year into the fund to keep it solvent. For the record, that's not the fault of the city employees who negotiated their contracts in good faith — and who weren't players in the Wall Street greed and corruption that wrecked the economy. In fact, if the city had continued paying into the fund in good times, the costs would be far lower now.

The various pension proposals look at a wide range of approaches, but in essence, both Adachi and Hellman's group are going to ask city employees to put more of their paychecks into the pension fund. That's the equivalent of a pay cut — they'll be taking home less money for the same benefits they currently receive.

It's true that city employees now get better pensions than most private-sector workers (a result in part of the fact that corporate American, aided by Congress, shifted most retirement plans to the 401(k) model, which puts all the risk on the employees and leaves employers largely off the hook). And there's some horrendous abuse, particularly by senior police and fire staffers (former Police Chief Heather Fong is getting $229,000 a year for life, which is ridiculous).

It's also true that the average midlevel city worker gets a pension between $20,000 and $24,000 a year.

Labor has already given back some $500 million in concessions over the past four years (and most of that money has come from lower and midlevel workers) City programs and services have been cut, by most estimates, by close to $1 billion.

The city has raised only $90 million in new taxes.

The bottom line is that over the past four years, the rich and big corporations, which are radically undertaxed in our society, have given back almost nothing to the city, have felt almost no pain. Unless pension reform takes that into account, it won't be fair or acceptable.

Comments

..."It's also true that the *average* midlevel city worker gets a pension between $20,000 and $24,000 a year."

Can you back this up- it's not even close? There is a reason SFERs conceals this type of info like state secrets- the #s are big.

The average pension of a career retiree for Contra Costa County was $85,500 in 2009. You're trying to tell us the SF County average retiree pension is $24,000 in 2011? Uh, no.

And those labor "concessions" you reference ($500 million), well the last round of $235 million was temporary and will disappear this year with only $3 million remaining in permanent savings for dental insurance. See recent budget committee hearings.

...and Heather Fong is not collecting $229,000 "for life." She received a bonus COLA of 3.5% in January- yes a bonus after the pension fund lost billions in 2008. She will receive periodic bonus COLAs and regular COLAs throughout her retirement.

Lastly, you should actually read the details of Adachi's latest plan since it mirrors what you have proposed.

Posted by Flowers on Mar. 31, 2011 @ 10:02 am

this is an accurate article fair, well written & researched. concessions are just what you say they are,temporary & are agreed upon by workers to help out in difficult times. investement bankers gambled with funds & lost, that is not the fault of workers , public or private. yes changes need to be made & will be, however, anger & jealousy between citizens& public employees will only help the wealthy continue to game the system & create an
upper class & a lower class so they will have complete control of our society.....

Posted by GuestDG on Mar. 31, 2011 @ 1:20 pm

Agree- no reason to be concerned with accuracy & journalism & getting the math right & all that detail stuff...You forgot your "attacking" public workers talking point...

Posted by Flowers on Apr. 04, 2011 @ 9:59 am

Jesus...

Only thing that could have made it more generic and tired is something about the Koch brothers. Put that in next time.

Posted by Sambo on Apr. 04, 2011 @ 3:17 pm

"Today, we spend $1 out of every $7 on pension and benefit costs for city employees; in five years, it will be one out of every $4."

Bankruptcy looms unless we urgently deal with this problem.

One of Adachi's proposals is to cap all pension payments at $85,000 a year. No one would be allowed to receive more than that.

This is entirely reasonable. One hopes that city workers won't howl in pain again during the upcoming campaign, or hire the Newsom Shill to force-feed the voters with lies again.

Posted by Guest on Apr. 04, 2011 @ 2:27 pm