Mayor Newsom looks at retiree health costs

The City is on track to pay more than $100 million annually for retiree health benefits in coming years — a price tag Mayor Gavin Newsom says needs to be lowered.

The City has one of the most generous retirement health packages in the nation, with employees qualifying for full coverage after just five years of employment.

Newsom highlighted what he saw as a problem in the system: A 19-year-old who works for The City for five years could then move out of state and The City would be obligated to pay for that former employee’s retiree health benefits.

Newsom said Thursday that he wanted to increase the tenure for receiving the retiree health benefits, but would not say by how much.

In 2000, The City’s retiree health benefits cost $30 million, and this year it expects to pay out around $100 million.

By better managing these skyrocketing health care costs, The City would be in a better position to handle the increasing operating budget deficits it faces in the coming years, according to the mayor.

The City will spend the next two years negotiating with its 38 labor unions a new retirement health care program, said Philip Ginsburg, director of the Department of Human Resources. “We need a new way to address this issue,” he said.

Any change to the program, though, requires a charter amendment, which needs voter approval.

Ginsburg said The City should create a fund for retiree health benefits, similar to a pension fund, where both the employee and the employer contribute money over time.

“We pay as we go, which is not good,” he said.

In accordance with a new rule passed by the federal Governmental Accounting Standards Board, The City will have to tabulate how much it will cost to fund retiree health benefits for years to come as well as an ability to cover those costs.

This new rule is driving the need for restructuring retiree health benefits, Ginsburg said.

Controller Ed Harrington said he plans on issuing a report within the next two weeks showing what The City’s liability for funding retiree health care benefits will be for the next 30 years. That number will be in the billions of dollars.

Civil service reforms touted

Mayor Gavin Newsom touted reforms to The City’s civil service system Thursday that he said would fix inefficiencies, but labor union officials claim the changes won’t achieve the results he is after.

Newsom said he negotiated a number of reforms in the last year with The City’s 38 labor unions that will cure the civil service system of its many problems when it comes to hiring, evaluating, training and firing employees.

The changes will affect the more than 27,000 people who work for The City. More than $2.5 billion is spent on personnel and salaries. During the next three years, salaries will increase by a total of 8 percent.

In the past, city workers have received automatic 20 percent raises in the first three and half years of employment, but with Newsom’s negotiated reforms workers will now receive an annual review before getting the raises.

Lawanna Preston, director of Service Employees International, Local 790, which represents about 9,000 city workers, said only 78 percent of its workers will not receive annual reviews because they are already at the top of their pay scale.

Preston also criticized the review because supervisors, she said, are not trained to give a fair evaluation.

Managers who arelaid off cannot displace other managers at other city departments based on seniority, a practice known as “bumping.” Newsom said “bumping” shouldn’t be allowed at “other ranks” either.

Newsom acknowledged that there is more improvement needed and that there are “hundreds and hundreds of people who are working in city government that shouldn’t be working in city government.”

Newsom said the overhauled civil service system hasn’t been embraced by all city employees.

“It's been a difficult thing for a lot of people and a lot of people are unhappy about it,” Newsom said of the change.

Preston said she thinks the reform was “rushed” and didn’t include input from “the people who work in the system.”

“I think everyone is holding their breath to see how this will work,” she added.

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