San Francisco voters gave the nod to a pension reform measure backed by Mayor Ed Lee. Proposition C

Pension reform measure backed by Ed Lee bests opposing proposition

Voters chose what was billed as a consensus pension-reform measure even though it would save The City less money than one authored by Public Defender Jeff Adachi, which was headed for defeat.

The dueling pension measures were placed on the November ballot as The City faces skyrocketing pension costs that could reach as high as $800 million by 2014.

Proposition C was crafted by Mayor Ed Lee in talks with members of the Board of Supervisors and labor union leaders. The measure saves The City less money than Proposition D, which was placed on the ballot by Adachi through a signature gathering campaign. Nearly 47,000 valid signatures were necessary. Prop. C was called the consensus measure that city leaders said addressed the problem fairly. It came with widespread support among labor leaders and elected officials.

Adachi is credited with forcing labor leaders and other elected officials to take seriously the rising cost of pensions for retired city workers. Last year, Adachi had everyone talking about the need to reduce pension costs when he placed Proposition B on the November 2010 ballot. The measure would have required city workers to pay more into their pensions and to pay more for their dependents’ health care benefits.

Labor leaders led a more than $1 million campaign to defeat the measure, but they also promised to work on a solution, which resulted in Prop. C.

The controller’s office said Adachi’s Prop. D would save $300 million to $400 million more than Lee’s competing Prop. C, which saves between $1 billion to $1.3 billion over the next 10 years.

The savings help pay for just a portion of The City’s $6.57 billion pension contributions to pensions during the next decade.

Both measures proposed increasing city workers’ pension contribution rates when The City’s pension contribution rate increases. Adachi’s measure had higher rates and placed a greater burden on higher paid workers. His measure set a baseline of 10 percent for public safety workers and 7.5 percent for other workers, while Prop. C sets a 7.5 percent baseline for all employees.

The City’s pension costs began to escalate when the nation’s economy took a turn for the worse in the mid-2000s, culminating in the economic collapse of 2008. That resulted in the pension investment fund taking a $4 billion hit. The City has since had to start contributing hundreds of millions of dollars a year to cover pension costs, money that otherwise could go to pay for basic services such as police, fire, parks and roads. In good economic years, The City was contributing zero dollars.

The City’s pension contribution is projected to increase to $800 million by 2014, according to the most recent estimates from the retirement system.

jsabatini@sfexaminer.com

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