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Tuesday, May 24, 2011

Pension Reform: Jeff Adachi Says Mayor's Proposal Doesn't Add Up

Posted By on Tue, May 24, 2011 at 2:30 PM

The new face of pension reform?
  • The new face of pension reform?

Mayor Ed Lee announced his long-awaited pension reform proposal today, partnering with Supervisor Sean Elsbernd to introduce an amendment to the city charter that aims to defray San Francisco's mounting liabilities for employees' retirement benefits. Lee's goal all along has been to get as many interest groups and fellow elected officials on board with his plans as possible, and it seems he has done well in this regard.

In addition to Elsbernd, the amendment is sponsored by Board of Supervisors President David Chiu, as well as Supervisors Mark Farrell, Carmen Chu, Scott Wiener, and Malia Cohen, guaranteeing Lee the votes he needs to get the measure on the ballot this year. Just as significantly, he has substantial backing from labor, including the police and firefighters' unions.

There's just one question that remains unanswered, and it's a big one: How much will the proposal actually save?

Lee and his supporters have not set a dollar figure on the proposal's results. This is significant, because doing the math is what pension reform is all about. The city is spending roughly $360 million per year of its $6.6 billion budget on pensions, with that figure expected to rise to $800 million in 2014. On top of that is a steadily accruing healthcare liability for employees, which now stands at $4.4 billion.

Lee's proposal, the full details of which have not been released, deploys a number of cost-saving measures, including increasing employees' contributions to their pensions; capping pensionable salaries; raising the retirement age; and basing pension rates on employees' salary over their final three years on the job, rather than the current one or two. (This prevents the practice known as "pension spiking," wherein workers obtain hefty raises in their final years to artificially inflate pensions.) The measure also includes a provision that existing employees begin contributing to the Retiree Health Care Trust Fund in 2016.

It is a less ambitious pension reform measure than that crafted by Public Defender Jeff Adachi, who last year placed an unsuccessful pension initiative, Proposition B, on the ballot. Adachi's new measure, for which he says he has collected roughly half of the 50,000 necessary signatures to qualify it for the ballot, includes a lower cap on pensionable salaries and uses the last five years of employment, rather than the last three, to set pensions.

Most significantly, it also comes with a calculated savings, which Adachi sets at between $90 million to $144 million annually. Based on his own calculations, Adachi says the mayor's new propsal would save $60 million to $70 million. By contrast, Lee told The Bay Citizen earlier this year that a serious plan would need to save $300 million to $400 million per year.

Adachi says he was briefed on the mayor's proposal prior to today's announcement.

"The first question I asked was, 'What are the savings?' And they had no idea," he says. "I applaud the mayor for taking this first step to solve this problem. The question remains: Will this proposal solve the problem? I don't see how they get through the math."

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Peter Jamison

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