The retiree health care quandary

The cost of health benefits paid by San Francisco taxpayers for retired public employees is not an issue that is frequently cited as a prime reason for The City’s ongoing budget woes. But it looms as an ominous factor that threatens to seriously impact our fiscal health if not addressed immediately.

When city voters, by a 57 percent to 43 percent margin, passed Proposition E in November 2000 to expand the health benefits of retired city employees, it was in the middle of a booming economy that it seemed to many would never end.

The impact on The City’s General Fund, it was argued by Prop. E’s advocates, would be manageable. All 11 city supervisors signed on to the plan, in which city government paid half of the health care premiums for not only each retired employee, but one of their dependents as well.

Since then, costs have skyrocketed. In 2000, The City paid $30 million for retirees’ health benefits. This year it expects to pay out about $100 million — and that may be just the tip of the iceberg.

With health care costs rising and the number of retirees increasing, the annual total is expected to soar even higher in the future. The city controller is scheduled to issue a report in the next few days detailing exactly how many billions of dollars The City will have to pay for retirees’ health care over the next 30 years.

Mayor Gavin Newsom has correctly identified the issue as a massive, hidden problem that could lead to fiscal catastrophe if something isn’t done. Newsom said last week that The City will attempt to negotiate new retirement health care plans with its 38 public employee unions, with an eye toward making costs more manageable and the plans more reasonable.

One place to start is in the absurd requirements to qualify for lifetime health care. As it stands now, a 19-year-old can get a job with The City, work here for just five years before leaving the state, then get lifetime health care, courtesy of city taxpayers, upon retirement decades

later.

Changing the system won’t be easy. The Board of Supervisors and former mayors have traditionally been loath to challenge labor contracts for fear of risking the wrath of public employee unions, whose endorsements, political contributions and armies of campaign volunteers are seen as keys to re-election for most local politicians.

But doing nothing means certain disaster, as costs would continue to rise and lead to severe cuts in public health, public safety, parks, Muni and myriad other city services. We’re heartened by Mayor Newsom’s willingness to take on the difficult task, and we urge him and the Board of Supervisors to put aside political considerations and create a fair, sensible and manageable system for taking care of our retired city workers.

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