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The Billion-Dollar Bet: Which Pension Reform Measure Will Pass and Survive Legal Challenge 

Wednesday, Aug 31 2011
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The seminal decisions the state Supreme Court made in the 1950s and '70s have little relevance today, Adachi maintains. With the court system itself crippled in the budget process this year, a number of government voices feel this is an opportune time for cities to press that pensions are bleeding them dry — strike while the iron is broke, in other words. If this is your mindset, California's mountain of case law doesn't amount to a hill of beans. "I wouldn't put too much stock in any of those cases," says Drexel University law professor and pension authority Norman Stein. "The law changes. You have a very different Supreme Court than you had in California in 1978. ... Right now, the law is probably in flux."

That a judge will be the ultimate arbiter of either measure seems all but certain. And though the city's plan was crafted in concert with labor leaders, it is not immune from legal challenges. It takes only one disgruntled person to sue — and the Fairness Float will disgruntle more than one person. Aforementioned projections establish that for the foreseeable future, workers would only pay more and never less. Even employees in early stages of their careers would never derive tangible benefits from this "commensurate benefit." Case law has established that, in determining if disadvantages to workers are truly offset, courts must focus on the particular employees who are disadvantaged — and whether they, as individuals, will gain from the potential pension plan changes. A benefit that doesn't provide benefits may be a hard sell. Yet locating litigants and lawyers willing to take on not only the city but the entire labor establishment may be a hard sell as well.

Voters are left with an intriguing — and not entirely enviable — decision. The city plan would admittedly save less than Adachi's. But it does so in a conventionally legally defensible manner. It also establishes bonhomie with labor — not a trifling matter with a number of contracts due to be negotiated in the near future, and the ever-present specter of litigation. Adachi's plan, meanwhile, would save the city more — and could serve as the legal bombshell to immolate the state's vested-rights doctrine. But it might blow up in the city's face — both plans were crafted to generate savings in the short-term, which neither will do if it's tied up in court or invalidated. Years-long legal battles would cost the city a fortune — but that expenditure will be dwarfed by the pension dollars the city bleeds while the measures meant to avoid just such a situation are litigated.

The city and its residents are on the cusp of a high-risk, high-reward gamble. Do you feel lucky? Well — do you?


Asked whether it was more important if his pension measure pass or he win the mayoral race, Adachi quickly answers, "Both." It's a fitting reply for a man who is both a lawyer and a politician, who rarely says more than he means to say, and who remains an enigma to his fellow elected officials, labor representatives, power brokers, and bureaucrats comprising the "city family" — which has essentially disowned him. But Adachi's leap into the mayoral fray was painted as anything but enigmatic by his political opponents. This, they said, was proof that the public defender always meant to leverage his 18-month pension crusade into a springboard for personal gain at the behest of billionaire Michael Moritz and other well-heeled backers.

"The pieces now fall into place," Elsbernd says. "In the end, what Jeff is really all about is Jeff."

While contributions to candidates are capped at $500 a pop in San Francisco — and no individual may give more than $1,500 total — donations toward ballot measures are unlimited. With a billionaire or two in his corner, Adachi can use his pension measure to generate serious money and name recognition. Of course, he isn't the only mayoral candidate pushing a pension plan and capable of tapping wealthy backers to generate piles of soft money. So is Mayor Ed Lee.

Earlier this year, Jim Stearns — the consultant who eviscerated Adachi's Prop. B in 2010 — was bounced from representing the mayor's pension plan. The decree was that no consultant affiliated with a mayoral candidate could handle one of the city's ballot measures, and Stearns is working for state Sen. Leland Yee. Lee, of course, subsequently declared his own candidacy for mayor.

With Stearns out of the picture, the path is now clear for Lee and his colleagues, if they so choose, to push Lee's candidacy via "the mayor's plan" — and do it on the dimes of labor, Warren Hellman, and other generous, unrestricted benefactors.

It warrants mentioning that, while "the mayor's pension plan" is the commonplace term, Lee was not on the front lines of crafting policy. That fell to his chief of staff Steve Kawa, Elsbernd, labor leaders, and personnel from the Department of Human Resources, Controller, and City Attorney. Like a general observing the battle from a hilltop, Lee was debriefed on progress while underlings led the cavalry charge. "He took a very appropriate role for an executive," one player in the plan says. A less-enamored observer describes Lee's function as "the affable uncle."

Shots in the battle between the pension measures have, in fact, already been fired. During negotiations about givebacks from public safety unions last month, Lee and the city handed the police and firefighters a politically pointed gift: They alone would be exempted from contributing at the Adachi plan's steeper rates until 2015. To obtain $31 million in givebacks, the city could be forfeiting up to $61 million in higher police and fire pension contributions — assuming, of course, Adachi's plan passes.

Also in July, Elsbernd introduced an amendment to the city plan, unanimously adopted by his fellow supervisors, that massively elevated San Francisco's pension tension. Elsbernd's move killed the possibility of nonconflicting elements of the rival pension plans — say, the health stipulations of the city's plan and the higher contribution rates of Adachi's — both becoming law if both pass. This, he says, was necessary to eliminate the possibility of an Adachi-led campaign to vote yes on both measures.

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.

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