From the Office of San Francisco Mayor Ed Lee.
May 24, 2011
Comprehensive Proposed Charter Amendment Would Save San Francisco $800 Million – $1 Billion in Pension & Health Benefits Costs over 10 years.
Mayor Edwin M. Lee and Supervisor Sean Elsbernd today introduced a proposed Charter amendment for pension and health benefits reform for the November 2011 ballot. After months of working with labor leaders, business leaders, community-based organizations and the City family, the consensus reform measure would restructure San Francisco’s pension and health benefits. The proposed Charter amendment is co-sponsored by Board of Supervisors President David Chiu and Supervisors Carmen Chu, Malia Cohen, Mark Farrell and Scott Wiener.
“Our consensus pension reform measure is comprehensive, balanced, and responsible. It will realize the savings we need so that we can protect vital City services now and in the future,” said Mayor Lee. “It is an important part of our overall strategy to bring structural reforms to San Francisco’s long term financial planning and budgeting and ensures that we have a system that San Francisco can afford, while providing pension and health care to its employees.”
The comprehensive measure would:
· Prevent pension spiking;
· Cap pension benefits;
· Raise retirement ages;
· Require greater cost sharing by employees;
· Use a sliding scale to protect lower wage employees; and
· Require greater employee contributions to the retiree health trust fund.
“What San Francisco has accomplished is historic,” said Warren Hellman. “Nearly everywhere else, pension reform efforts have pitted elected officials and business groups against labor and many have failed. Here, these same groups have worked together and produced a consensus cost-saving proposal that I’m sure will be supported by San Francisco voters.”
“The significant cost savings from this proposal will be used to provide critical services for San Francisco residents and taxpayers,” said Supervisor Elsbernd. “The comprehensive nature of the measure puts San Francisco on a path to sustainability, and it does so in a legally defensible manner.”
Mayor Lee was joined today by city, business and community leaders including Steve Falk from the San Francisco Chamber of Commerce, Gabe Metcalf from the San Francisco Planning and Urban Research, Steven Fields from Progress Foundation and Sherilyn Adams from Larkin Street Youth from the non-profit sector, and members of “Stand Up for Working Families”: Fire Fighters Local 798, IFTPE Local 21, Municipal Executives Association, San Francisco Police Officers Association, Plumbers Local 38, Municipal Attorneys Association, and the San Francisco Labor Council.
Like almost every other city and county in the nation, San Francisco is struggling to meet the increasing costs of pension and health care obligations. Losses in investment funds have driven the cost of providing these benefits to unsustainable levels. At the same time, health care costs of active and retired employees continue to increase at a rapid rate. Structural changes are critical to be able to continue to provide needed City services over the long term. San Francisco’s total employer contributions to retirement and health care are set to increase by more than $125 million in FY11-12. In each of the succeeding three fiscal years, additional increases are expected in excess of $100 million.
The proposed Charter Amendment takes a comprehensive approach to these challenges by creating new, less expensive pension tiers for all new hires; implementing a system of cost sharing, in which employee pension contributions rise and fall with the City’s costs; providing for employee funding of a portion of the City’s costs for retiree health care; and making structural and governance changes to the City’s health care system to improve efficiency and reduce costs.
“Cities around the nation face the daunting challenge of reforming pensions and health benefits,” said Board of Supervisors President David Chiu. “In San Francisco, we are doing it right by proposing a consensus measure that strengthens the long term fiscal health of our city and protects the basic services that our residents deserve.”
“The consensus plan not only produces significant savings,” said Thomas P. O’Connor of Fire Fighters Local 798. “But it takes into account how it affects real working people with families.”
What this proposed Charter Amendment will do:
1. Create additional cost-sharing of up to six percent for future and current City employees based on increases to the City’s required retirement contributions. Employees earning less than $50,000 per year are exempted.
2. Cap Pensionable Salary for new employees at 75% (safety) to 85% (miscellaneous) of IRS rate.
3. Create new retirement tiers for new employees that increases the minimum and maximum ages under the City’s retirement formulas:
a. Miscellaneous: 2.3% at age 65 (down from 2.3% at age 62)
b. Safety: 3% at age 58 (down from 3% at age 55)
4. Pension to be based on final compensation period over three years for new employees instead of final one or two for current employees.
5. Eliminate “vesting retirement” annuity for new miscellaneous employees who do not qualify for a service retirement, and replace it with deferred service retirement.
6. Mandate that Supplemental COLAs are only to be paid when the Retirement Plan is fully funded.
7. Require that all elected officials participate in cost-sharing and pay their own retirement contributions.
8. Include Deputy Sheriffs and “miscellaneous safety” employees in cost-sharing obligation even though their retirements are currently provided via contract with CalPERS.
9. Amend the composition of the Health Services Board to ensure balanced decision-making.
10. Require existing employees to begin contributing to the Retiree Health Care Trust fund starting in 2016-17.
11. Restrict certain retiree health benefits for employees who left City employment, but who have not yet retired to those benefits that were in effect as of the date of their employment.
The Charter amendment must next be discussed at a hearing of the Board of Supervisors Rules Committee before being considered by the full Board for the November 2011 ballot.