In what appears to be an almost breathtakingly sensible compromise, City Hall has negotiated a proposed deal with San Francisco’s labor groups that would go far toward defusing what its main organizer calls an estimated $4 billion “fiscal time bomb” of public service retiree health care costs.
Supervisor Sean Elsbernd spent weeks negotiating for The City with labor leaders on a charter amendment resolution he has just introduced. This must now be endorsed by a Board of Supervisors majority on Feb. 26 and approved by union members in coming weeks, before being submitted to voters on the June ballot.
The draft agreement was announced this week in a joint statement by Elsbernd, Mayor Gavin Newsom, Board of Supervisors President Aaron Peskin and Tim Paulson, executive director of the S.F. Labor Council. How refreshing it is, although regrettably unusual, to see representatives of various municipal interest groups come together in negotiations that benefit the entire city.
Reaching an agreement on how to cut off the looming crisis of unfunded government retiree health care costs is certainly no small matter. As recently as 2000, The City spent no more than $17 million on retiree health benefits. For this fiscal year, those costs have somehow multiplied to an astounding $115 million. During the next 30 years, The City will face approximately $4 billion in unfunded retiree health care costs, according to the City Controller’s Office. Such a debt load cannot be sustained.
The amendment’s solution is to require city employees hired after Jan. 10, 2009, to contribute 2 percent of their paycheck into a newly established Retiree Health Care Trust Fund, much as they already pay into a pension trust fund. The City would contribute another 1 percent toward retiree health coverage, instead of continuing to fund the entire cost.
The City would no longer provide workers hired after Jan. 10, 2009, with 100 percent retiree health care coverage after just five years of employment at age 50, plus 50 percent coverage for a spouse or domestic partner. Instead, the new employees would get 50 percent coverage after 10 years on the payroll, 75 percent after 15 years and reach 100 percent coverage in 20 years of service.
The measure also wins a wage freeze on city employees until December 2010, on top of the current hiring freeze. What organized labor stands to obtain for agreeing to these reductions is an increase in retirement pension payouts for all city employees — both current and new — as well as an increase in cost-of-living adjustments.
San Francisco’s benefits for retired city workers have historically been among the most generous in California, although other municipalities in the Bay Area and Southern California have blithely accumulated even more crippling unfunded pension obligations. The new charter amendment brokered by Supervisor Elsbernd goes a long way toward bringing San Francisco into 21st century budgetary realities. And if it does not succeed in becoming law, The City is just asking for trouble.