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Friday, December 3, 2010

Labor's Budget-Busting Numbers Just the Beginning

Posted By on Fri, Dec 3, 2010 at 2:01 PM

Guess what? We weren't bullshitting you...
  • Guess what? We weren't bullshitting you...

Today's San Francisco Examiner does an efficient job of summarizing the ghastly numbers projected by the  mayor's budget office. The upshot: Despite wage concessions, labor costs will grow by $101.1 million in the fiscal year commencing in July of 2011.

A hefty chunk of this metric shitload of money is composed of benefits -- pensions and health care, namely -- which are not negotiable costs. The city is charter mandated to pay workers' pensions and health care, no matter how dire its fiscal situation. You may remember SF Weekly discussing this in a recent cover story. You also may recall handily voting down Proposition B, which would have shunted 14 percent of the city's future benefits costs onto workers. 

Here's something the Ex didn't note: The numbers it bandies about are conservative. It could be much worse -- and, in future years, it will be.

Take pensions: The mayor's budget office assumes the city will be contributing to the San Francisco Employee Retirement System at 16 percent next year. That's a hell of a lot of money. But it's actually a rosy projection.

Here's how it works: Based on an audit by an independent, outside actuary the city determines how much money it must put into the pension system each year. This year it contributed 13.56 percent of payroll -- that's 13.56 percent of $2.4 billion, or $324 million.

Next year's payroll figures to be a little higher. Still, using this year's totals, a 16 percent pension contribution comes out to $382 million. But, here's the rub: A 16 percent contribution is a conservative projection, and by no means guaranteed.

Other projections SF Weekly has seen generated by the independent auditing firm range between 16.3 percent and 17 percent. We couldn't find any as low as 16 percent, actually. And, keep in mind, 1 percent of payroll is some $24 million. These differences aren't trivial.

click to enlarge Even that won't cover it...
  • Even that won't cover it...
Of course, within a few years, San Francisco's projected contribution to the pension system figures to leave 16 percent -- or 16.3 percent or 17 percent -- in the dust. By 2016, even relatively conservative projections put the city shelling out 25, 27, or even more than 30 percent. Assuming a flat payroll -- quite an assumption -- that'd be a potential payout of $726 million. Or more. And we haven't even gotten to health care yet!

One could certainly take issue with Prop. B architect Jeff Adachi's methods of "solving" the city's benefits crisis. But to state we don't have a benefits crisis is akin to global warming denial.

Everyone in City Hall who can do math is terrified right now. It remains to be seen how many people that really is.

Follow us on Twitter at @TheSnitchSF and @SFWeekly 

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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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