Get SF Weekly Newsletters

Tuesday, January 10, 2012

Pension Bomb: San Francisco's Contribution May Explode by $60 Million

Posted By on Tue, Jan 10, 2012 at 5:59 PM

How does this alter the city's financial outlook?
  • How does this alter the city's financial outlook?

Barring an unlikely reversal at a Wednesday meeting, the city's forthcoming pension contribution may swell by $60 million in the next fiscal year alone -- and the city's union workforce could also be made to contribute millions more than they'd anticipated.

At issue is whether the San Francisco Employee Retirement System will undo last month's vote to follow its actuary's advice. That advice was to lower the city's anticipated investment return rate from 7.75 percent to 7.5 percent. While this may sound insignificant, we're talking about 0.25 percent of a very large number indeed.

Here's what's at stake. Pension plans are funded via three sources -- investment returns, city contributions, and worker contributions. The city has long assumed a 7.75 percent return when tabulating yearly how much money it will have to contribute. Last month, by a slim 3-2 majority, the city's retirement board voted to lower the assumption to 7.5 percent. To put things as simply as possible, when you're assuming a lower investment return, you're mandating a higher city contribution -- $60 million is the figure currently being bandied about in City Hall.

In the past, the city would have eaten this money on its own. But, thanks to "The mayor's pension reform measure," Proposition C -- which voters passed overwhelmingly in November -- city workers could be forced to partake in this foul meal as well.

One of the key elements of Prop. C was "The Fairness Float." In short, the more the city pays, the more workers are expected to pay. When investment returns are so amazingly good that the city hardly pays anything, city workers' mandated payments drop as well (though this isn't predicted to happen in a generation's time). City workers who pushed hard to pass Prop. C might now be asked to contribute far, far more than the amount they were told before the election.

Gone, gone, gone...
  • Gone, gone, gone...
Of course, this scenario might not play out if a majority of the seven-person retirement board opts to overturn December's vote to follow its financial expert's advice -- and decide to spurn the expert advice.

Two board members were not present at that vote -- Herb Meiberger and Brenda Wright. SF Weekly has learned that Meiberger is pushing for a re-vote at tomorrow's meeting. Doing the math, however, it appears unlikely that he can find three colleagues to support him. In December, board members Sean Elsbernd, John Driscoll, and Wendy Paskin-Jordan outvoted Al Casciato and Victor Makras to follow the actuary's advice and lower the expected return rate from 7.75 percent to 7.5 percent over the next three years.

Casciato, however, is purportedly unable to make tomorrow's meeting. That means even if Wright joins Meiberger and Makras in voting to overturn last month's decision, one of the board members who pushed to lower the rate would have to change colors -- and move to potentially underfund the system.

Tomorrow's meeting is scheduled for 10 a.m. Millions of dollars and political reputations are on the line. Pensions may be complicated and beguiling, but get used to it -- it's not a problem anyone's solving anytime soon.

Follow us on Twitter at @SFWeekly and @TheSnitchSF 

  • Pin It

Tags: , , , , , ,

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.

Comments

Subscribe to this thread:

Add a comment

Popular Stories

  1. Most Popular Stories
  2. Stories You Missed

Like us on Facebook

Slideshows

  • clipping at Brava Theater Sept. 11
    Sub Pop recording artists 'clipping.' brought their brand of noise-driven experimental hip hop to the closing night of 2016's San Francisco Electronic Music Fest this past Sunday. The packed Brava Theater hosted an initially seated crowd that ended the night jumping and dancing against the front of the stage. The trio performed a set focused on their recently released Sci-Fi Horror concept album, 'Splendor & Misery', then delved into their dancier and more aggressive back catalogue, and recent single 'Wriggle'. Opening performances included local experimental electronic duo 'Tujurikkuja' and computer music artist 'Madalyn Merkey.'"