Monday, July 24, 2017

[San Francisco County] Voter generosity helped SF pile up huge pension tab

A civil grand jury found that San Francisco has a huge $5.8 billion pension liability, and a series of retroactive benefit increases approved by voters over a dozen years is mostly to blame.
San Francisco has a staggering $5.8 billion pension liability, and a series of retroactive benefit increases approved by voters over a dozen years is largely to blame, according to a recently released civil grand jury report.
That generosity is contributing to an eye-popping increase in the public payroll. The grand jury found that the cost of city salaries and benefits, which include pensions, has grown by 33 percent over the past decade — and it’s expected to keep up that pace for at least five more years. That will add another $698 million to the public tab.
And while these estimates come right out of the city’s budget forecasts, said grand jury member Christopher Bacon, “it’s a bigger problem than I think the city has wanted to face.”
According to veteran City Hall watcher and Chamber of Commerce Vice President Jim Lazarus, the mounting retirement expenses “for the foreseeable future (will) require a substantial general fund payment into the pension system.”
That, in turn, could force the city to cut services, and it may “affect the number of employees ... and the wage and benefit packages (the city) can afford,” Lazarus said.
It’s worth noting that the city has paid almost twice as much in pension contributions as workers over the past decade. In that time, the city’s annual contribution has more than tripled, to $526.8 million.
At the heart of the city’s pension troubles, the civil grand jury found, are 10 ballot measures approved by voters between 1996 and 2008 that allowed for retroactive increases to employee retirement benefits.
“These retroactive increases were very expensive gifts to employees and retirees from taxpayers, paid for with money borrowed at a high interest rate from the retirement system, and paid back over 20 years by taxpayers,” the grand jury said.
Among them was Proposition H in 2002 to boost police and firefighter pensions — which had the backing of everyone from the entire Board of Supervisors to Sen. Dianne Feinstein and Rep. Nancy Pelosi. Their ballot argument, plus a statement from then-Controller Ed Harrington, said there would be “no costs to taxpayers for at least 10 years,” thanks to the pension system’s “large surplus.”
If the retirement surplus was “ever exhausted,” police and firefighters would be required to negotiate with the city “to pay for the added benefit themselves,” the advocates said.
That never happened, we’re told — although police and firefighters now pay a higher percentage into their pensions.
After reviewing the impact from the wave of retroactive pension increases, the grand jury concluded that a series of mayors, members of the Board of Supervisors, city controllers and retirement board members “did not fulfill their responsibility to watch out for the interests of the city and its residents.”
City Controller Ben Rosenfield, while acknowledging the seriousness of the rising pension debt, blames more recent events for the city’s predicament. Pension recipients are living longer, he said, and the courts overturned a 2011 city initiative that would have limited cost-of-living increases for retirees — delivering a $1.3 billion blow to San Francisco’s pension savings.
And while the grand jury also points to $1.4 billion in investment losses dating back to the economic crash of 2008, city retirement board member Victor Makras says the agency’s own poor investment strategies are the real issue.
“We can’t blame (the recession) anymore,” he said. “We are responsible for prudently investing.”
July 10, 2017
San Francisco Chronicle
By Phillip Matier & Andrew Ross


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