Let It Bleed

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

Pension increases were approved by voters in 1996, 1998, 2000, 2002, 2004, and 2008. Also in 2000, the city's five-year vested health care plan was rendered even more generous by Proposition E, capping retirees' payments and allowing them to get dependents into the plan. "That ballot measure has cost us hundreds of millions of dollars," Elsbernd says. "Eventually, it'll cost us billions."

City residents angry that the rec center pool has people living in it and that the city's potholes have potholes are themselves partly to blame. In voters' defense, however, the measures brought to the electorate were crafted and backed by labor and the entire spectrum of San Francisco's relevant political structure — and publicly condemned almost exclusively by token Republican gadflies who decry any expenditure of public dollars as creeping socialism. 

But San Francisco was warned by credible people, too. Former supervisor and state Senator Quentin Kopp wrote in the 1990s that upping pensions would "turn the clock back to an era of runaway expenditures, budgetary gaps, and extraordinary pension plans for a selected few city employees, at the expense of taxpayers and other city employees." Essentially, that's what happened. But with the economy booming, austerity was a tough sell.

While the city was ever-increasing the percentage of workers' final salaries they'd be paid in perpetuity, it was also raising those salaries. Between fiscal 2001-02 and the present, the size of the city's workforce has remained stable — but its budgeted salary jumped by some $566 million. Pensions are based on final salaries, so the combination of augmenting both salaries and pensions is akin to receiving a raise followed by a bonus based on your salary — with a cherry on top. For life. 

City voters also approved changing final salaries from the average of workers' last three years to their salary during their last year on the job. For most employees, this was simply a small financial benefit. But for those who received fat promotions in their final years, it was a personal gold mine. According to a recent Civil Grand Jury report, 68 percent of firefighters in the past several years received a raise of 10 percent or more in their final year on the job. The Board of Supervisors' response to reports of institutionalized pension-spiking has been to pass resolutions forbidding pension-spiking, without defining what it is or admitting it ever occurs.

This law isn't just toothless — it doesn't even know what it's supposed to bite. Addressing the supes at a recent hearing, Deputy Fire Chief Monica Fields flatly told the Board of Supervisors, "Any increases on final pensionable compensation are legitimate ... increases in final pensionable income do not occur for purposes of increasing employees' pension compensation." End of discussion. And that was good enough for the board.

This pattern of behavior makes no sense if you assume that the purpose of San Francisco city government is to run San Francisco. But it makes perfect sense if you think of San Francisco as a vending machine for salary and benefits.

It's not a scheme, but it is a system. All the people responsible for making decisions about San Francisco's pensions are themselves receiving a city pension — so there are no truly independent actors.

The unions whose members gain from increased benefits are direct contributors to politicians tasked with making decisions about union members' benefits. The last eight measures augmenting pensions or health care were placed on the ballot by the Board of Supervisors — by an aggregate 79-4 vote.

The city's Health Services Board, which decides what medical plans San Francisco uses and how they're implemented, has seven members — a majority of whom are elected by city employees to represent city employees. Every step of the retirement process is controlled by people who have a vested interest in it — literally. Not only is the fox guarding the henhouse, the fox has opened up a KFC franchise.

In theory, politicians are supposed to act as a check on ballooning retirement costs — but in San Francisco, unions and politicians are like conjoined twins. That's why, on those rare occasions when someone does actually propose solutions to our retirement crisis, politicians and unions sabotage them together.

Take Proposition H, which voters enacted in 2002. The measure, which upped maximum police and fire pensions from 75 percent to 90 percent, was sold with the pledge that, should the city ever have to contribute to its pension plan again, public safety workers would "meet and confer" with the city and "cover all or part of the costs" of the vastly augmented new pensions. The public handily approved the measure with the understanding that it could do limited fiscal harm. Even the controller indicated that the retirement system's "large surplus" rendered the notion of the city paying cash to support the changes far-fetched.

D'oh. The city's pension holiday ended abruptly in 2004 — and a recent Civil Grand Jury report claims the city failed to enforce Prop. H, paying hundreds of millions of dollars that ought to have been picked up by public safety workers.

City officials claim they did nothing wrong. In 2003 — a year before the city had to contribute to the pension system — public safety employees agreed to pay some of their pension costs in order to stave off a budget shortfall. The city now claims this concession also satisfied the Prop. H cost-sharing requirement — which wasn't triggered until a year later. One pot of money was used to satisfy two wholly separate obligations in different years. The cops and firefighters' contribution was double-booked.

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