With pension costs expected to rise by$400 million over the next five years, San Francisco can no longer afford to kick the can down the road on pension reform. Numerous reports, including those by The City’s Controller and Civil Grand Jury, have found that pension costs will continue to escalate unless something is done. These increases will require city services to be slashed and more fines and fees paid by residents to keep up with pension costs.
This year, nearly half of The City’s $306 million deficit is fueled by increased City employee pension and benefit costs. Last week, The City’s bond rating was downgraded, in part due to our failure to address this issue, which will increase our borrowing costs by millions. After studying the problem, Mayor Ed Lee has said that without immediate reform, The City will go bankrupt.
Last November’s pension reform measure failed by 15,000 votes. This year, a new, improved measure will be presented to the voters. The new measure effectively solves the pension crisis while remaining true to San Francisco’s progressive values.
San Franciscans for Pension Reform, a citizen-led group formed to address our city’s fiscal crisis, has begun collecting voters’ signatures to place pension reform on the November 2011 ballot. The new measure will achieve the following reforms:
- A balanced cost sharing of pension costs between city employees and taxpayers. Currently, city employees pay a fixed rate of 7.5 percent towards their pension costs, while the taxpayers’ cost is projected is to increase to four times that in just five years. Under the new measure, when the City’s pension cost increases, elected officials and city employees will also be asked to contribute more.
- Employees who earn less than $50,000 will be exempt from any increases while those who earn more will pay a graduated percentage based on their income level.
- Ending the practice of pension “spiking,” which allows an employee to increase his or her pension in the last year of service.
- A prohibition against paying “bonus” pension benefits, which cost the City $170 million this year unless the pension system is fully funded.
- A cap on pensions, to prohibit employees from receiving excessive pensions.
- Public safety employees, whose pensions cost two to three times more than other city employees, will pay 2.5 percent more towards their pension costs.
- Retirement ages will be increased to 65 for city employees and 57 for police and fire employees.
- The measure does not affect collective bargaining rights of city employees.
An independent analysis by the City Controller’s Office has concluded the measure would save between $90 and $144 million each year.
This is not a piecemeal reform that relies on accounting tricks to hide losses. It won’t require a new fix in a few years when pension costs rise. Instead, this proposal provides an honest and fair solution that will put our city back on track to financial stability while protecting basic services.
While interim Mayor Ed Lee has shown leadership by attempting to facilitate a solution, none of the declared mayor candidates has pledged to support the above reforms. In fact, most of them publicly opposed pension reform in last November’s election. Without a mayor committed to implementing real pension reform, this issue will fall by the wayside and will be undermined by side-deals made in exchange for political support, as has occurred in the past.
This is why the voters must act to correct this problem. Unless they do, San Francisco residents will continue to experience drastic cuts in education, street repair, and parks, while seeing increases in everything from parking tickets to property taxes. More critically, our city’s pension debt will ultimately be passed down to our children.
San Franciscans can download and sign the petition by visiting www.sfpensionreform.com or by finding a signature gatherer or volunteer at your local grocery store. The time for pension reform is now.
Jeff Adachi is the City’s public defender. Craig Weber is a former member the civil grand jury that issued two reports on the need for pension reform.