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The Thin Bottom Line: A Dubious Program Has Double-Paid Cops $58 Million so Far 

Wednesday, Aug 28 2013

An uncle in Brooklyn used to take furtive joy in scouring the airwaves for Crazy Eddie discount electronics commercials. These featured a manic gent who produced sounds resembling speech and attempting to impart a message that, ultimately, came down to the fact that he was waving his arms and was, indeed, crazy.

Sadly, they never played those out here in San Francisco. But, several times a year, we do get to scour the voter information pamphlet. Within, you'll discover polemics penned by token Republican loons, whose arguments are no more convincing for being hand-written, in all-caps, and riddled with malapropisms. Sadly, however, these fulminations merely serve as comic relief interspersed among material more tragic than humorous.

Crazy Eddie, it's worth mentioning, went bankrupt and was eventually jailed for fraud. And, here in San Francisco, the true costs of city propositions grow starkly and alarmingly clearer every year. You can still find all of the old voter pamphlets in the library, larded with dubious assurances to the electorate.

They ought to file them in the fiction section.

In the 2008 voter pamphlet, San Franciscans were informed by the city controller that a scheme to stave off veteran cops' retirements by offering to simultaneously pay them both salaries and pensions for up to three years wasn't a bad idea at all. In 2011, now-former controller Ed Harrington had a different line for your humble narrator: "It appears you're paying people twice. Because, in fact, you are."

And yet, a majority of the Board of Supervisors signed a statement in that '08 pamphlet declaring this Deferred Retirement Option Program (DROP) — iterations of which had triggered multi-million-dollar meltdowns around the country — "makes absolute sense for San Francisco. It is good public policy."

No one bothered to write a rebuttal. Not even a token Republican loon. So, 65 percent of voters threw down for a program with an exceedingly dubious track record, which, despite assurances of cost-neutrality, wouldn't even be fiscally assessed for three years, and would stretch at least six years, to 2014. No one knew, or even had any way to know, how much it was going to cost.

Well, here's your answer: You don't want to know.

DROP participants earn full paychecks while their pension payments are squirreled away in a tax-deferred account — with a guaranteed 4 percent return. Upon retirement, they receive a fat lump-sum payment — and then begin drawing a pension that, after several years of cost-of-living adjustments, may exceed their final salaries.

In June and early July, 58 officers retired en masse, collecting $15.4 million in lump-sum payments. Overall, 268 cops have passed through DROP, pocketing $58 million. And the hits keep coming: 73 officers remain in the program, which won't expire until next June.

Once again, this costly, overtly double-dipping program was pitched to voters by their own elected representatives as "good public policy." It's certainly good for someone.

Outside the realm of politics, a program double-paying employees as the only means to postpone their diving into lucrative retirement isn't just perversely bad policy, it's a clear sign that your entire system is built on sand. In San Francisco, it gets worse — and, once again, we voted for this.

In the 2002 voter pamphlet, the controller claimed that boosting police and fire pensions to 90 percent of final salaries at age 55 would, all but certainly, never harm the city's general fund or taxpayers. This turned out to be a spectacularly misguided assumption — file that voter pamphlet under "fantasy" — but it went utterly unchallenged by loons and luminaries alike.

Honest mistakes or honest cravenness are understandable. But, considering the arguments advanced for the pension hike, the subsequent sell-job for DROP twisted all logic into a Möbius strip.

In short, San Francisco voters were urged in 2002, by every last cousin in the so-called City Family, to richly incentivize cops to retire early. Then, in 2008, voters were cajoled to richly incentivize cops to work past retirement. Of course we did both — we're so accommodating that way.

Veteran cops were urged to both stay and go — and rewarded for both.

Perverse policy leads to perverse argumentation. In 2011, then-police union boss Gary Delagnes told us that DROP must be maintained, in perpetuity. Otherwise, officers would flood the program when it became clear DROP would be curtailed, leading to a cavalcade of mass-retirements and massive payouts. Discontinuing a program meant to prolong cops' careers would prod them into joining up — and retiring early.

In other words, the program must be retained, lest it be used.

This argument, amazingly, didn't carry the day. The Board of Supervisors two years ago discontinued DROP — but not before scores of cops did indeed seize their last opportunity to sign up, and earn simultaneous paychecks and pensions into 2014.

Far fewer officers enrolled in DROP than the doomsday scenario promulgated by Delagnes. But Delagnes himself joined up, retiring from the program in June and bagging $279,730.

DROP math isn't easy. You have to balance the costs of double-paying old cops with the savings of not hiring new ones. But you can only postpone bringing in new blood for so long. And if veteran cops take advantage of DROP's hefty payments and simply retire when they would have anyway — or even retire early — then it's not working. In fact, a 2011 analysis claimed DROP was actually spurring a glut of early retirements. That's depressing.

So's this: DROP is a textbook example of how special interest groups intensely focused on providing for their members — and only their members — are the ultimate winners in our democratic system. That textbook, as your humble narrator noted several years back, is The Logic of Collective Action, a seminal 1965 treatise on government by economist Mancur Olson.

Small groups, Olson wrote, can elbow aside larger ones, "even if the vast majority of the population loses out as a result," because of the nature of concentrated benefits and dispersed costs. Those $58 million in payments average out to some $216,000 a cop. For one person — in a pillowcase, say — that's a lot of money. But within the multi-billion-dollar oceans of the city's tax base and pension fund, it's a puddle. The police union's incentive to push for its members' concentrated benefits exceeds any politician's or bean-counter's rationale to resist fervent union efforts over a sum dwarfed by the leviathan city budget. So they don't. And we don't resist when they tell us what to vote for.

When you think about it, Crazy Eddie's catchphrase — but hopefully not his fate — sums up San Francisco nicely: His prices are INSANE!

About The Author

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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