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Let It Bleed 

The city is awash in red ink, thanks to billion-dollar benefit giveaways and our politicians' lack of will.

Wednesday, Oct 20 2010

Page 5 of 5

At a recent committee meeting, Supervisor Sophie Maxwell asked the Controller's office if the dire financial picture pointed out in a 2010 Civil Grand Jury report was right. It seemed so bad — could it possibly be true?

"This is not news," Peg Stevenson told her. "You all have been aware of this. ... Those things are true, and you have all been working on them."

Maxwell acknowledged this. Then the supervisors went on to disagree with most of the findings they'd admitted they knew were true.

Much in the same way people in the city haven't prepared adequately for an earthquake everybody knows is coming, San Francisco is going out of its way to sandbag serious efforts to address a financial disaster.

Both labor-friendly supervisors and labor leaders insist there is a solution for this problem. That solution is for labor-friendly supervisors and labor leaders to meet and devise a solution.

"We need to involve all the stakeholders," Supervisor David Campos says. "It can't be one supervisor or one elected official, be it the public defender or anyone else, making a top-down move." Adds San Francisco Labor Council executive director Tim Paulson, "Public employee unions have been at the table every single time to deal with anything to save city services."

Unions and politicians sitting around a table, talking about contracts? Sounds great. Except, isn't that what got San Francisco in trouble in the first place?

John Avalos doesn't foresee a pleasant chat. "We're going to have to say no to labor," he says. "There's going to have to be cuts in the workforce, the largest part of our budget. We have no choice but to come up with these concessions."

That's not the conversation labor wants to have. Both Paulson and Bob Muscat, executive director of Engineers' Local 21, claimed actuarial projections of massive pension contributions are unrealistic "worst-case scenarios." This is factually untrue, but Muscat went one better. He claimed that the independently prepared actuarial predictions — undisputed by any city agency and long used to set contributions to the city's Employee Retirement System — are bunk. "Some people honestly don't believe any of those costs," he says. "I know people who've spent half their life in the retirement system who disagree."

So, in essence, a city that has bent over backwards for decades to accommodate labor, and is vigorously defending it against this year's Prop. B, is now using "bad" actuarial data to force union concessions. It's doing this by contributing hundreds of millions more to their pension plans than it would otherwise have to.

Well, okay then.

San Francisco does have some long-term approaches that could help. Very long-term. In 2009, voters passed Prop. D, which mandates that the city significantly fund its retirement account during years when investment returns are good enough that it could take one of those pension holidays. It's a great idea — and if it were in place 20 years ago, the city would now be on solid fiscal footing. Unfortunately, it will probably be decades before the balance sheet is healthy enough that Prop. D will be triggered.

At the city's Health Service System, director Catherine Dodd has an ambitious plan to reduce San Francisco's health care costs by keeping employees healthy and fit. The city is providing Weight Watchers classes, exercise opportunities, and healthier food choices — and looking for opportunities to do more. That's why she has concerns about Prop. B. Making insurance more expensive means employees will use less of it, which can cost the city more in the long run.

Dodd is also trying to use San Francisco's clout as a major customer to force industry reforms that could save big money down the line. Health care providers now must meet the city's criteria for effectiveness and follow-through or fork over millions in penalties.

Clever — but, again, these are strategies that could take decades to see real savings. No one knows how to even start chipping away at the health system's $4 billion unfunded liability.

Other ideas are just too politically unpalatable. Elsbernd says he'd like to see the amount employees pay for their benefits indexed to the amount San Francisco pays — so that when one goes up, both go up. That way, unions would have to pay for every increased benefit they ask for, and would reap rewards if they save the city money.

But even if these programs help, they'll help only so much. The key to understanding San Francisco's fiscal future is this: For decades, when San Francisco had money to save, it was too busy spending it. Instead of preparing for the enormous cost of its workers' benefits, it paid for popular programs. That's no longer an option.

San Francisco can either bring its benefits into line, substantially raise taxes and fees to maintain the status quo, or severely cut services and employees. Or it can do all of the above.

San Francisco's benefits system is protected by the city charter, and is sustainable. The city, as we know it, isn't.

About The Authors

Joe Eskenazi

Joe Eskenazi

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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