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Thursday, January 13, 2011

Pension Tension: New Contribution Rate Will Be $433 Million a Year*

Posted By on Thu, Jan 13, 2011 at 2:30 PM

click to enlarge money_vacuum.jpg

*Update, Jan. 19: It turns out the actual contribution rate is currently slated at $423 million. See here for an explanation.

Remember all that hard stuff Mayor Ed Lee has to do? Deal with unraveling labor agreements, balance a creaking budget, and scrub hair gel stains off of low-hanging lighting fixtures and the tops of chairs? Well, he'll have to do it with upwards of $26 million less than he thought he would.

On Tuesday, the city's independent actuaries set the employer contribution rate to the pension system at an eye-popping 18.1 percent of payroll. The city this year contributed 13.6 percent, and earlier projections had anticipated a 17 percent contribution in fiscal 2012.

Here's what that means: The city will siphon $433 million out of the general fund and into workers' pensions. That's a $109 million jump in one year, and a $26.3 million spike over even the worst predictions we could find. Remember that pension and benefits crisis SF Weekly wrote about? Turns out it wasn't a joke!

"This is no longer a future apocalypse," says public defender Jeff Adachi, who immolated his bridges with labor and the left by pushing pension and health care reform measure Proposition B (it lost). "This is on us now."

The predicted contribution rates in last year's Civil Grand Jury report "Pension Tsunami," criticized by labor and its backers as hysterical, actually turned out to be overly conservative. "It was very realistic," says Craig Weber, that report's primary author. "And here we are." 

In addition to the coming 18.1 percent payout, the current projections foresee a 28.8 percent pension contribution by 2015 -- that'd be $688 million if payroll remains stagnant until then (and more if it grows, logically). Contributions will not drop below 20 percent until 2028.

You can see the projections here:
click to enlarge money_rain_big.jpg

You would think such horrifying news would inspire renewed fiscal austerity. You would think this if you didn't know anything about how San Francisco rolls.

San Francisco's Employee Retirement System last month approved $170 million in supplemental Cost of Living Adjustment for its retirees based on better-than-expected investment returns. Also, raises given to current cops and firefighters have translated into post-retirement sweeteners for their aging colleagues.

It would appear that this is a pro-forma deal, as it is written into the city charter that retirees must receive supplemental COLA payments "when there is sufficient excess investment returns." Other cities, including San Jose, suspended similar payouts. But San Jose isn't charter-bound to make them. San Francisco is.

"To think the retirement board is approving a $170 million Cost of Living Adjustments at a time when they're drawing hundreds of millions of dollars from the general fund is outrageous," says Adachi. "Here we are -- not even questioning it."

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About The Author

Joe Eskenazi

Joe Eskenazi

Bio:
Joe Eskenazi was born in San Francisco, raised in the Bay Area, and attended U.C. Berkeley. He never left. "Your humble narrator" was a staff writer and columnist for SF Weekly from 2007 to 2015. He resides in the Excelsior with his wife, 4.3 miles from his birthplace and 5,474 from hers.

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