SF voters to decide pension reform issue

October 26, 2011 7:44:34 PM PDT
Next month, San Francisco voters will have an opportunity to weigh in on an issue that cities across the country are grappling with, the financial crisis involving city employee pensions.

Now, there are competing pension reform measures on San Francisco's ballot and residents have a choice to make.

About 26,000 people work in San Francisco city government and when they retire, they are entitled to pensions. This year, the city is expected to spend about $422 million on employee pension costs. By 2014, that is expected to skyrocket to $800 million. That is money not spent on schools, pothole repairs or social programs.

Analysts say it is driving the city toward disaster.

"Your alternative is to declare bankruptcy," said Barbara O'Connor.

"It's a crucial area that has to be reformed," said Rod Pimlott of the California Center for Public Policy.

San Francisco's 2009-2010 civil grand jury warned of what it called "the pension tsunami." There are more than 23,000 retirees. According to their report, just over 3,200 of them are receiving $75,000 or more in pensions each year. Retirement systems officials say the vast majority of the rest average $34,000 a year.

When the economy was booming and pension systems flourished on their investments in stocks and real estate, the payouts could be supported, but not now.

"Pension reform has been my signature issue and the reason why this is the biggest issue facing our city," said Adachi.

He backed Prop B on last year's ballot to require greater financial sacrifice from employees, but a ferocious pushback from labor defeated the measure. This year, as a mayoral candidate, he is back with what he calls the "Son of Prop B," Proposition D.

Most employees currently contribute 7.5 percent of their paychecks toward their future retirement. Prop D changes that formula based on how much an individual worker is making.

"It has a graduated sharing of contribution rates. What that means is higher-paid workers pay more and lower-paid workers are either exempt or pay less," public defender Jeff Adachi said.

Prop D would raise the retirement age for some employees and cap benefits. The city controller says the measure will save the city 1.7 billion over 10 years. Critics say Prop D faces potential legal challenges because it takes away vested pension rights without giving new benefits in exchange.

The competing measure, Prop C, is backed by Mayor Ed Lee, unanimously passed by the board of supervisors, and is supported by the city's unions and almost all of the mayoral candidates. Prop C keeps 7.5 percent as the baseline pension contribution, but allows a decrease in good economic times and an increase from workers when the economy falters.

Prop C also ups the retirement age for new employees and requires everyone to contribute to their health plan. The controller estimates Prop C will save the city $1.3 billion over 10 years. The mayor calls C "the consensus measure."

"Prop C is uniting everybody because everybody is joining in and everyone is paying their fair share. We have unity that is important to our city," Lee said.

O'Connor is an emeritus professor specializing in political communications who retired from Cal State Sacramento. She thinks voters will prefer Prop C.

"When you say pension reform to the average voter, their eyes glaze over. So, you've got to have a very simple message and in this case, fairness, and "we all agree on this," two very important messages with voters and I think will win out," she explained.

However, Pimlott says Prop D is the better alternative.

"San Francisco is headed over the cliff financially. You can take a short term approach like C. It'll put a Band-Aid on, but won't stop the bleeding. You really need to take a much bolder step and Proposition D is that step," he said.

The measures require a majority vote to pass. If both do, the one with the most votes becomes law.

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