Pass: 118,729 / 74.05% Yes votes ...... 41,598 / 25.95% No votes

See Also: Index of all Measures

City employees other than certain safety employees such as police officers and firefighters are referred to as "miscellaneous" employees. These employees are represented by various unions that collectively bargain for wages and benefits. The amount of retirement allowance for these employees is determined by multiplying their highest annual salary by an age factor for each year of service. The age factor is 1% at age 50, rising to 2% at age 60. Thus, employees with 20 years of service receive 40% of their highest annual income if they retire at age 60.

Each year, the basic cost of living adjustment (COLA) benefit is calculated based on the original retirement benefit amount up to 2%. When the retirement fund has enough excess investment earnings, the retirement system must also pay an additional benefit called a supplemental COLA, not to exceed a total adjustment of 3%.

THE PROPOSAL: Proposition B is a Charter Amendment that would increase the years of service required to qualify for employer-funded retiree health benefits for City employees and certain employees of the School District, the Superior Court and the Community College District who retire under the San Francisco Employees Retirement System or the California Public Employees' Retirement System and were hired on or after January 10, 2009.

Employees become eligible to participate in the retirement health care system after 5 years of service. Employer contributions to the retiree health benefits for these new employees would be as follows:

• No employer contribution for employees with 5 to 10 years of service;
• 50% for employees with 10 to 15 years of service;
• 75% for employees with 15 to 20 years of service;
• 100% for employees with 20 or more years of service, employees who retire for disability, and surviving spouses or domestic partners of employees killed in the line of duty.

Proposition B would establish a separate Retiree Health Care Trust Fund to pay for the City's future costs related to retiree health care. This Trust Fund would be funded by employer and employee contributions for employees hired on or after January 10, 2009. These new employees would contribute up to 2% of their pre-tax pay and employers would contribute 1%. The School District and the Community College District would have the option to participate in and contribute to this Trust Fund if their governing boards approve.

This Trust Fund would be administered by a Retiree Health Care Board governed by five trustees, one selected by the City Controller, one by the City Treasurer, one by the Executive Director of the San Francisco Employees Retirement System, and two elected by the active and retired members of the City's Health Service System.

In addition, Proposition B would make the following changes to retirement benefits and COLAs for miscellaneous City employees who retire on or after January 10, 2009:

• The age factor for employees who retire at age 60 would increase to 2.1% and rise to 2.3% at age 62. Thus, employees with 20 years of service would receive 42% of their highest annual salary if they retire at age 60 or 46% if they retire at age 62.
• The basic COLA benefit would be compounded annually based on the retirement benefits payable on June 30th of the prior year.
• The supplemental COLA, which is paid when there is enough excess investment earnings, also would increase for a total adjustment of retirement benefits up to 3-1/2%.

Should the proposed charter amendment be approved by the voters, in my opinion, the City will have both significant added costs in the near and medium term for the cost of employee pension benefits and significant savings in the near term under its labor contracts and in the long term for the cost of retiree health benefits.

Pension Benefits: The Charter amendment would increase the maximum retirement benefit available to City miscellaneous employees from the current 2% of final pay at 60 years of age, up to 2.3% of final pay at age 62 and enhance cost of living increases for pension recipients. These changes would add approximately 3.5% of salary to the cost of funding an average employee's retirement benefits, or an ongoing annual cost to the City of approximately $84 million for the next 20 years, dropping after 20 years to an ongoing annual cost of 1.1% of salary or approximately $27 million at current rates.

To partially pay for this increased retirement benefit, the amendment freezes wages for the 2009-2010 fiscal year. This provision is estimated to save the City approximately 2.1% of salary or an estimated $35 million on an annual basis. These savings estimates are based on an assumption that the City would otherwise have provided wage increases at percentage rates at or near the projected consumer price index for that period and is consistent with the City's historical experience in negotiated labor contracts. Finally, the Charter amendment specifies that the City's ongoing expenditures for improved retirement benefits under this proposal must be considered the equivalent of wages in future labor arbitration proceedings. Note that these provisions do not apply to the labor contracts for police, firefighters, sheriffs, nurses and transit operators.

Retiree Health Benefits: Currently, employees are eligible for fully paid health benefits following retirement after five years of working for the City and regardless of where they spend the balance of their careers. The amendment retains eligibility at five years, but changes the City contribution to provide graduated levels of paid coverage; 50% paid with ten years of service of service, 75% with 15, and 100% with 20 years of service. It also requires that employees actually retire within 180 days of leaving City employment to receive benefits. Under the Charter and Federal laws, these changes will not affect any current employees--only those hired after January 10, 2009.

Employees hired after January 10, 2009 will pay 2% of salary, and the City will pay 1% of salary into a new trust fund to pay for retiree health benefits. The amendment would reduce the number of people who would eventually have been eligible for paid retiree health benefits and the cost to the City of their benefits. It also will create significant savings for the City as investment earnings in the trust will help pay for the cost of the benefits going forward. By 2031 the majority of employees will be under this new benefit plan and, based on the City's actuarial analysis, the proposed funding of 3% of salary is estimated to be sufficient to cover the cost of the benefits on an ongoing basis.

Note that the City currently pays the cost of retirees' health benefits each year as that year's expense is due. As a result, there is a substantial unfunded liability, estimated to be approximately $4 billion in total, for the future cost of retiree health benefits that current employees have already earned. That liability is somewhat reduced by the proposals in this Charter amendment which address future hires, but the bulk of the cost, estimated at between $250 and $300 million annually at current rates, will have to be otherwise addressed by the City.

Meaning of Voting Yes/No

A YES vote on this measure means:

If you vote yes, you want to change the Charter to increase the years of service required for new City employees and certain employees of the School District, the Superior Court and the Community College District to qualify for employer-funded retiree health benefits. You want the City to establish a separate Retiree Health Care Trust Fund to fund retiree health care costs. You want the City to increase retirement benefits and retirement COLAs for certain City employees and to freeze wages and other economic benefits of these employees for one year.

A NO vote on this measure means:

If you vote no, you do not want to make these changes to the Charter.

In just six years, annual retiree health care costs have risen from $17 million to $115 million. San Francisco now faces a $4 billion unfunded liability for retiree health care costs already promised.

Left unchecked, this staggering liability could undermine health benefits for all employees, drastically impact taxpayers and city services, and, without action, potentially bankrupt the system.

Proposition B is a comprehensive reform package that protects retiree health care, taxpayers and city residents.

Crafted by city employees and their unions, working together with the Mayor and Board of Supervisors, Proposition B maintains current retiree health care benefits, but lengthens the period required for new city employees to qualify for subsidized benefits. In return, city employees, whose pension rates are among the lowest in the state, will receive a modest pension increase.

Proposition B:

• Maintains eligibility for retiree health care for all current and new city employees;
• Extends the time necessary for a city employee to work to gain fully subsidized retiree health care;
• Creates a separate retiree Health Care Trust Fund and mandates contributions from both employees and the city to help defray future retiree health care costs;
• Increases Cost of Living Adjustments (COLA) for retirees and modestly improves pensions for employees who retire at or after age 60;

Protect retiree health care and our future economic stability by voting YES on B.

Mayor Gavin Newsom
Board of Supervisors President Aaron Peskin*
Supervisor Sean Elsbernd
Tim Paulson, Executive Director, San Francisco Labor Council
Steve Falk, President, Chamber of Commerce
Judith Berkowitz, President, Coalition for San Francisco Neighborhoods

• For identification purposes only

Proposition B is a classical case of why we need to change the San Francisco City Charter regarding municipal employment rules.

As matters stand, virtually any minor change in City employee laws must be voted upon in a costly City Charter election -- such as this one.

Many tens of thousands of dollars will be spent on counting the votes on this very minor City Charter amendment.

We need to draft new City Charter language to delegate to the Mayor and Board of Supervisors the right to modify carefully defined minor City employee laws.

As a safeguard, perhaps we should require a two-thirds vote on the Board of Supervisors.

In any event, Proposition B is just the latest minor proposal to appear on the ballot in a City Charter election, costing taxpayers a mountain of money for a molehill of municipal employee law change.

Amend the City Charter. End all the tax waste.

Dr. Terence Faulkner, J.D.
Republican Central Committeeman*
Past Chairman of San Francisco Republican Party* (founded: January 1856)
Parkmerced Residents' Organization (PRO) Board Member*

Eve Del Castello
Republican Central Committee Candidate*

Denis J. Norrington
Owner
Arrow Stamp Company*
Econo-Color*
Privacy Plus*

Doo Sup Park
Voting Alternate Delegate
Republican Central Committee*

Mike Garza
San Francisco Chapter President
Mexican American Political Association (MAPA)*

• For identification purposes only

This proposed San Francisco City Charter amendment proposal [Proposition B] illustrates why City employment work rules should not be locked into the Charter. Every time the rules need to be changed, another expensive election and vote-counting is required.

The Board of Supervisors (perhaps by a two-thirds majority?) and the Mayor should be delegated these powers... to save public tax funds. This would be a good government measure.

+ Dr. Terence Faulkner, J.D.
Past State Secretary
California Republican County Chairmen's Association*

+ Eve Del Castello
Republican County Central Committee Candidate*

• For identification purposes only

We have come together to develop Prop B, a plan that preserves fair health and retirement benefits for city workers, while reducing future healthcare costs by more than a billion dollars..

The Mayor AND the Board of Supervisors enthusiastically endorse Proposition B because it sets aside money now to meet the City's long-term obligations. Prop B preserves health benefits and provides a fair pension for all city workers. It lengthens the probationary period before new city employees receive full health benefits. And it saves $1.4 billion in healthcare costs over 30 years. The Chamber of Commerce AND the San Francisco Labor Council support Proposition B because this comprehensive reform package protects retirees' health benefits and provides a modest cost-of-living adjustment while avoiding hundreds of millions in unnecessary healthcare spending.

The San Francisco Democratic Party AND the San Francisco Republican Party urge residents vote Yes on B, because it was a compromise measure where people of all sides came together to make it reform. Proposition B protects San Francisco's economy and ensures retiree benefits in the future.

SPUR (San Francisco Planning and Urban Research Association) supports Proposition B because it is sensible, smart reform.

Now is the time for comprehensive reform. We urge you to vote Yes on B.

Mayor Gavin Newsom
Board of Supervisors President Aaron Peskin *
Supervisor Sean Elsbernd
Tim Paulson, Executive Director, San Francisco Labor Council
Steve Falk, President and CEO, San Francisco Chamber of Commerce
Judith Berkowitz, President, Coalition for San Francisco Neighborhoods

• For identification purposes only