San Francisco paid only $17 million for retired public employee health care costs in 2000, when the economy and Wall Street were flying high. By 2004 those costs had ballooned to $69 million, and they have nearly doubled since then — to $115 million this year. Right now the City Controller’s Office estimates the unfunded liability for retiree benefit costs will be $4 billion during the next 30 years.
This self-imposed debt burden is hardly uncommon across California these days, but it is among the state’s largest. San Francisco owes more than the city of Los Angeles ($3.2 billion) or San Diego County ($1.38 billion). By comparison, San Mateo County’s hefty $469 million unfunded obligation appears almost inconsequential. The state’s debt for retired public employees is $48 billion, and the entire fiscal structure of California government is virtually sitting on a ticking time bomb.
We welcome the news that San Francisco is attempting to step up and take the lead on resolving this blatantly unsustainable situation. At Tuesday’s Board of Supervisors meeting, Supervisor Sean Elsbernd — fully backed by Mayor Gavin Newsom — will introduce a charter amendmentto return The City’s retiree health benefits considerably closer to reality.
Elsbernd bluntly warned that with 30 more growth years of unrestrained retiree liabilities, San Francisco might no longer be able to provide basic services, suffering massive layoffs and sale of city assets. San Francisco must act now, as it enters another ongoing deficit period. A $229 million shortfall was just announced for next year, and the mayor seeks 13 percent cuts from the budgets of city departments actually doing today’s work for the public.
The reforms being sought by Elsbernd and Newsom seem reasonable and rather mild. There would be no changes in benefits legally locked in for current city employees, who now are eligible for complete benefits at age 50 with only five years on the job. New employees would have to work 20 years before collecting full lifetime medical coverage at the age of 55. They would vest to 50 percent coverage after 10 years and 75 percent after 15 years, with spouses or domestic partners getting half the benefit rate.
New employees could be required to contribute up to 3 percent of their earnings into a new co-pay fund that also could draw on city reserves. Departing public employees would have to prove they are fully retired, not working at new jobs.
Apparently there have been closed-door negotiations between city officials and organized labor. And the union leaders insist any money-saving changes must be sweetened with a trade-off for higher pension benefits. A more labor-friendly rival measure is being introduced before the board Tuesday by Supervisor Gerardo Sandoval, who said raising pensions would give employees an incentive for staying on the job longer.
To us, it seems a retirement package already beyond the wildest dreams of most private-sector workers is all the incentive needed, especially when combined with salaries generally better than for comparable private sector jobs.