"Infinite" is not a word you expect to find in a report on municipal spending. It's more of a science fiction–type term — Tremble, Earthling, before the infinite might of Galaxor! But there it was, in a recent report on San Francisco's finances: Spending on the city's employee retirement system in the past decade had grown at an "infinite" rate.
Naturally, that's an exaggeration. If you do the math, the city's retirement costs for employees in the past 10 years actually grew only 66,733 percent.
Still, you might call that a Galaxor-sized number.
In fiscal year 1999-2000, the city spent about $300,000 on its retirement system. In fiscal year 2009-10, it was $200.5 million. Benefits alone — not salaries, just benefits — for current and retired employees this year are budgeted at $993 million. Spending on retirees' health care and pensions is conservatively projected to triple within five years.
And after that? Infinite.
This is not a conspiracy but, rather, a mathematical certainty. It's also not a surprise. Every San Francisco government official who can do math has known about this calamity for years.
This isn't a uniquely San Franciscan problem. Cities and states across the country are facing a pension and health care meltdown. In fact, compared to many retirement systems nationwide, San Francisco's has been well run. There's no rampant corruption (cough, cough, Bell), and it wasn't spectacularly mismanaged (Achoo! San Diego). Many retirement systems would gladly trade places with this city's.
But that's because, given the chance, those other cities would actually try to solve the problem. What's uniquely San Franciscan about our benefits crisis is that we aren't trying. San Francisco has known about this looming crisis for a decade — and gone out of its way to make things worse.
In fact, on those few occasions when somebody has tried to do something about it, city government has worked with unions to successfully sabotage those efforts. San Francisco may not be in as deep a hole as many cities, but it's shoveling a lot harder.
This election cycle, the city's practiced mastery of procrastination and hand-wringing has been brought to the fore by Proposition B, a so-called pension reform measure that would require increases in pension and health care contributions from the city's workforce. Its author, Public Defender Jeff Adachi, admits that it doesn't come close to solving the fiscal nightmare. But even this baby step has been subjected to a coordinated assault. Unions have assembled a million-dollar war chest against it; the Democratic County Central Committee voted 29-0 to tell people to vote against it; every single elected official (besides Adachi) has gone on record opposing it — and Mayor Gavin Newsom has said publicly that, if it passes, he expects to find a way around it.
After all, the city has a history of cynically sidestepping this kind of reform. No matter what the voters say.Want to see the complete list of San Francisco employees whose pensions are over $75,000 (all 2,384 of them!)?: Click on the link below to view and download the list.
San Francisco is named for St. Francis, the patron saint of animals and the environment. Its budget, however, is the domain of St. Jude, the patron saint of lost causes. Close to a billion dollars — and counting — is now sucked out of the general fund every year to fund workers' benefits. The city's other programs and responsibilities are being martyred.
This year, the city is contributing $324 million from the general fund to its pension plan — more than it spends on the Recreation and Parks Department ($127 million) or the fire department ($289 million). These contributions aren't negotiable: San Francisco is charter- and contractually mandated to make them. As they rise toward infinity and beyond, money is simply siphoned away from all the other obligations of city government. "Cuts in the city budget are real," says Peg Stevenson, the director of performance at the City Controller's office. As a result of San Francisco's rapidly escalating pension payments, she says, "people got laid off, grants to community organizations ceased. There isn't anybody who works with money in the city who isn't aware of the scope of this."
Not surprisingly, fiscally conservative Supervisor Sean Elsbernd agrees. More surprisingly, so does liberal Supervisor John Avalos, a former union organizer. "We've been going off a cliff year after year; nothing is getting fixed structurally," Avalos says. "What we're gonna have to do is cut the hell out of services and look at revenue options."
Says Elsbernd, "Budgets are going to get slashed. Jobs will be cut, services will be cut, fees and taxes have to go up. The core problem with our budget is our benefits. It is the fundamental reason why our budget is so out of whack."
So we're already taking away services from people who live here to pay for people who no longer work here.
But that's not the worst of it. There's an even bigger financial apocalypse right behind this one. By 2015, the city's pension contribution will swell to at least half a billion dollars — as a best-case scenario. Meanwhile, the city has a $4 billion unfunded health care liability looming that it hasn't saved any money for.
Unless the notion of spending your golden years in a cardboard box sounds appealing, you'd be better off not funding your retirement plan in the same manner as San Francisco and countless other cities. Pension contributions come from three sources — employees, the city, and the city's investments. During boom years, investment income allows the city to go on a "pension holiday," paying nothing in, as San Francisco did from 1998 to 2004. But when the market tanks, it creates a crisis that reverberates for years. The city not only has to contribute heftily to the pension system, it must also pay down the investment fund's losses. Remarkably, right when a sour economy hits and the city has no money, it's required to start paying vastly more of it.