A report by the City Controller’s office released this week details the skyrocketing costs associated with health and pension benefits paid to public employees and retired city workers.
It paints a grim picture of a ticking fiscal time bomb that threatens to devastate The City’s ability to fund needed services in coming years.
More than 28,000 public employees receive a generous benefits package that includes free health care along with pension benefits, with all retired employees and some dependents also receiving health care.
While city officials have known for years that the combination of a growing city workforce, rising health care costs and the increasing numbers of retired employees was an issue that would have to be dealt with sooner or later, the just-released controller’s study makes it clear that there is no more time to wait.
In the next fiscal year, The City will pay $771 million for public workers’ benefits — a 19 percent increase over the current year and a more than 100 percent increase from the 1999-2000 fiscal year.
The numbers are significant because the bulk of the money comes from The City’s operating budget, meaning public employees’ benefits compete for dollars with crucial public services including police, fire, health clinics, transportation, youth programs and more.
But with the rising costs for public employee benefits locked in by iron-clad union contracts, any budgetary shortfall is balanced by taking from public services.
The impact is already being felt — while a resurgent economy helped Mayor Gavin Newsom close a manageable $35 million budget deficit for next year, a $115 million deficit is projected for the 2007-08 fiscal year due to rising costs.
That number will only grow in the future, leading to the prospect of ugly budget battles in which city officials, having signed off on benefits packages in the past, will be forced to make cuts in other areas that will severely affect the quality of life for city residents.
Mayor Newsom recognizes the problem and intends to open talks with labor unions to renegotiate contracts. Any efforts by The City to scale back the current benefits of city workers, however, will present a challenge for the mayor, who will face well-organized, politically powerful unions that will likely be none too eager to take a step back from the generous benefits they have won for their unionized
But there seem to be no alternatives on the horizon. After years of ignoring the problem, employee benefits are the 800-pound gorilla in the room that City Hall must finally address.