The legendary thief Robin Hood may have engaged in illegal activities, but at least he restricted his robbing to the rich and shared his loot with the poor. However, exactly the opposite would happen if pension reform for San Francisco government employees is linked with tax increases on commercial rent, gross receipts and income, higher utility fees and other financial hits on productive citizens and businesses.
More than one-third of city workers earn more than $100,000 per year when overtime and unused vacation are factored in. The average city employee makes more than $90,000, which does not include the tens of thousands of dollars worth of health care, pension and other benefits that most receive. City employees earn about 20 percent more than those in the private sector, along with significantly better benefits. And many city employees currently contribute very little or nothing at all to their generous benefit packages.
San Francisco pension costs have nearly tripled to $357 million in the past decade, while retiree health care costs have quintupled to $156 million, according to a recent study. The City’s unfunded pension liability ranges from $1.6 billion to $4.5 billion, depending on the investment valuation — with a 40 percent chance of it reaching a $20 billion shortfall. Unfunded retiree health care costs of $4.4 billion are projected to more than double to $9.5 billion by 2028.
As a result, the city budget is squeezed more and more each year, from a 9.5 percent contribution last year to 13.6 percent this year and 18 percent next year. By 2016, about 1 billion taxpayer dollars will go for benefits — more than will be spent for police, firefighters, sheriff deputies, district attorneys, public defenders and probation officers combined.
Clearly, the pension tsunami is about to wash over The City, taking many city services and much of the quality of life with it. But the solution should not include passing more of the costs on to the private sector. Many businesses have struggled to stay afloat during the Great Recession. This is especially true in California, which has the nation’s highest sales tax rate, the third-highest state income tax, the eighth-highest corporate income tax rate (highest west of the Mississippi except for Alaska), second-worst business tax climate and second-highest unemployment rate.
Sixty-nine companies moved out of the state so far this year or are planning to expand elsewhere. They include eBay and PayPal, which will add 1,000 jobs in Austin, Texas, over the next 10 years, and BP Solar, which is moving from The City to Houston. Even San Francisco rock icon Carlos Santana is relocating the operational functions for his music label and publishing company to Las Vegas.
This is the worst time to add billions of extra costs to San Francisco’s businesses and residents in order to pay for out-of-control government employee benefits. It’s time for those who receive the most and benefit the most from government largesse to pay their fair share.