San Francisco faces retiree health costs

Getty Images File PhotoCity officials are beginning to deal with the growing cost of health care for retired government workers.

Getty Images File PhotoCity officials are beginning to deal with the growing cost of health care for retired government workers.

After starting to rein in San Francisco’s pension costs last year, city officials are rolling up their sleeves to tackle the skyrocketing cost of health care for retired government workers.

A City Controller’s Office report released Tuesday, which shows a retiree health care liability of $4.4 billion during the next 30 years, set the stage for discussions between city officials and labor leaders to hammer out an agreement to help fund the tab. If last year’s pension compromise — the voter-approved Proposition C — is any indicator, the effort will take months of meetings and include heated debates.

But the political will may see the issue through.

“As public officials, we cannot ethically and morally avoid this issue,” said Supervisor Mark Farrell, who is taking the lead on the situation for the Board of Supervisors. He called The City’s retiree health care liability “the largest threat to our financial future.”

The City’s budget woes are seen in its continual inability to pay for such basics as repaving streets, adequately staffing the Recreation and Park Department, properly maintaining street trees and adequately funding Muni’s capital needs.

Last fiscal year, The City spent $151 million subsidizing a portion of the health care premiums for former city government workers. But that annual tab will increase to $500 million within two decades. There are 19,270 members in The City’s retiree health care system. Depending on their selected health plan and number of dependents, individual contributions vary from zero to $1,048 per month for a pre-Medicare retiree with one or more dependents.

For decades, city employees and San Francisco did not contribute funds to help pay for these future costs. Instead, The City just paid the bill every year.

“From a financial management perspective, there is a better way to do this,” City Controller Ben Rosenfield said.
That “better way,” he believes, is to implement a “pre-funded” model, similar to how The City funds its pensions. That means having a healthy interest-bearing fund filled by adequate contributions from both The City and its workers.

The City has taken some steps toward this end. In 2008, voters passed Proposition B, which created a Retiree Health Care Trust Fund and eliminated some of The City’s more generous retiree health benefit provisions, such as full vesting after five years of service. And workers hired after January 2009 have to contribute 2 percent of their salary into the fund, with The City kicking in another 1 percent.

The 2011 pension ballot measure included the provision that workers hired before 2009 would begin contributing up to 1 percent of their pay into the fund beginning in 2016 with a matching 1 percent from The City.

Mayor Ed Lee supports the effort to curb city retiree health care costs.

“Clearly, there is a significant challenge ahead about how The City pays for health benefits for those hired before 2009,” mayoral spokeswoman Christine Falvey said. “The mayor will work with labor, the board, and other key stakeholders to identify ways to bring down this long-term liability and strengthen the City’s fiscal outlook.”

Farrell said he is hoping to have a proposal by mid-2013, which could include a proposed November ballot measure.

jsabatini@sfexaminer.com

 

A ballooning crisis

The City’s health care liability promises to grow steadily:

$4.42 billion

Unfunded retiree health care liability over 30 years

What The City has spent on retiree health ?care premiums, per fiscal year:

  • FY 2007-08: $111M
  • FY 2008-09: $117M
  • FY 2009-10: $128M
  • FY 2010-11: $146M
  • FY 2011-12: $151M
  • Projected:
  • FY 2020-21: $300M
  • FY 2031-32: $500M

Bay Area NewsGovernment & Politicsheath costLocalPoliticsSan Francisco

If you find our journalism valuable and relevant, please consider joining our Examiner membership program.
Find out more at www.sfexaminer.com/join/

Just Posted

Cities including San Francisco, Oakland and Berkeley are calling for large grocery and drug store chains to pay employees hazard pay for working during the COVID-19 pandemic. (Shutterstock)
SF proposes $5 hazard pay law for grocery, drug store workers

San Francisco may soon join the growing number of cities requiring large… Continue reading

Hikers walk along a closed stretch of Twin Peaks Boulevard on Friday, Jan. 22, 2021. (Kevin N. Hume/S.F. Examiner)
SFMTA board to vote on future of Twin Peaks Boulevard

The proposal would keep Burnett Avenue gate closed to vehicles, open Portola Drive

Kindergarten teacher Jennifer Klein collects crayons from students in the classroom at Lupine Hill Elementary School on Monday, Nov. 9, 2020 in Calabasas, California. (Al Seib/Los Angeles Times/TNS)
Newsom, legislators strike deal to reopen California schools

Taryn Luna and John Myers Los Angeles Times Gov. Gavin Newsom and… Continue reading

A sign about proposed development of the bluff at Thornton State Beach in Daly City on Friday, Feb. 26, 2021. (Kevin N. Hume/S.F. Examiner)
Retreat center proposed at popular state beach

Daly City residents oppose construction on ocean bluffs

City supervisors are calling for an expansion of free summer programs for elementary age kids. (Kevin N. Hume/S.F. Examiner)
Supervisors urge city to provide free summer programs for all SFUSD students

San Francisco supervisors on Monday announced a proposal to expand summer programs… Continue reading

Most Read