Proposition D: City Pension Benefits - San Francisco County, CA

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League of Women Voters of California Education Fund

San Francisco County, CA

November 8, 2011 Election

Proposition D
City Pension Benefits
City and County of San Francisco
Charter Amendment - Majority Approval Required

Fail: 62358 / 33.45% Yes votes ...... 124051 / 66.55% No votes

See Also: Index of all Propositions

Information shown below: Summary | Fiscal Impact | Arguments |

Shall the City amend its Charter to increase pension contribution rates for most current City employees based on the City's costs; reduce contribution rates and pension benefits for most future City employees; limit cost-of-living adjustments to pension benefits; prohibit the City from picking up any employee's contribution for pension benefits; and make other changes to the City's retirement system?

Summary Prepared by San Francisco Department of Elections:
Proposition D is a Charter amendment that would change the way the City and current and future employees and elected officials share in funding SFERS pension benefits. City employees who receive retirement benefits from CalPERS would not be affected by any changes in this proposal. All employees would pay a minimum contribution. The minimum contribution rate, as a percentage of compensation, would be:

6.0% for most future employees,
7.5% for most current employees,
8.0% for future police and firefighters, and
10% for current police and firefighters.

Proposition D would require elected officials to pay the same contribution rates as City employees.

Employees and elected officials making $50,000 or more would pay an additional amount when the City contribution rate is at least 10% of City payroll. The rate for the additional amount would range from 1.0% to 8.5% of employee compensation, depending on the City contribution rate and the employee's compensation level.

Proposition D would change SFERS service pension benefits for all employees and elected officials hired after December 31, 2011, by:

For all employees, limiting covered compensation to base salary, calculating final compensation from a five-year average, and changing the multipliers used to calculate pension benefits.
For safety employees, the minimum retirement age would remain at 50 but the years of service requirement would increase to 10 years. These employees would be eligible to receive their maximum pension at age 57.
For miscellaneous employees, increasing the minimum retirement age to 55 with 20 years of service or 65 with 10 years.
For all employees, limiting the maximum annual pension to the lesser of 75% of final compensation or $140,000, adjusted for inflation.

Some safety employees in SFERS plans created in 2010 who leave City employment before becoming eligible for service retirement can receive a modified service pension or "vesting retirement." Proposition D would provide that, for these employees, the percentage per year of credited service would be the same as for the new service pension plan. For those miscellaneous employees in SFERS plans created in 2010, the minimum age to receive a vesting allowance would rise to age 55 and, when applicable,the percent per year of credited service would be the same as for the new service pension plan.

Proposition D would also:

limit cost-of-living adjustments for SFERS retirees;
prohibit the City from paying any employee's contribution;
permit current employees to participate in the lower contribution/ lower benefit plans that apply to new employees;
permit all employees participating in such plans to pay lower contribution rates under certain circumstances; and
for current and future employees, permit the City and unions to negotiate a supplemental retirement plan with defined City and employee contributions.

Fiscal Impact from San Francisco Controller:
City Controller Ben Rosenfield has issued the following statement on the fiscal impact of Proposition D:

Should the proposed Charter amendment be approved by the voters and implemented, in my opinion, the City's costs to fund employee retirement benefits will be reduced by approximately $70 to $80 million in fiscal year (FY) 2012-13. City costs will be reduced by approximately $1.3 billion to $1.7 billion cumulatively over the ten years between FY 2012-13 and FY 2021-22. For context, the 10-year City savings from the measure represent approximately 23%+26% of the City's projected pension plan contributions expected during that time frame. In the long term, after most City staff are subject to the new pension formulas established by this measure, City savings are projected to be approximately $100 million annually. These savings projections are estimates; actual savings will depend on the future funding status of the pension fund, the size of the City's workforce, and other demographic trends. Savings estimates are provided in terms of constant FY 2011-12 dollars, and therefore control for potential impacts of inflation on future dollar values.

Approximately 60% of these savings will benefit the City's General Fund, with the balance benefiting enterprise and other special fund departments, including the Municipal Transportation Agency, Public Utilities Commission, Airport and Port. Savings will also accrue to non-City employers that participate in the San Francisco Employees' Retirement System.

Approximately $875 million to $1.3 billion of the ten year savings would result from increased contributions by City employees earning over $24 per hour that would be required on a sliding scale when the pension system is underfunded. These estimates assume ratification of proposed safety employee labor agreement amendments currently pending before the Board of Supervisors. The remaining $400 million savings would result from a revision to the cost-of-living increase formula for current and future pension recipients and pension plan changes for new employees hired after January 1, 2012.

In the long term, after most City staff are subject to the new pension formulas established by this measure, and assuming that pension systems return to full funding, savings under this measure are estimated at approximately 4.7% of pensionable payroll, or equivalent to approximately $100 million annually in Fiscal Year 2011+12 dollars and pensionable payroll.

Additional Costs or Savings Factors that could cause additional costs or savings include: First, to the extent that Retirement System investment returns are outside the range assumed in this analysis, both the required employer contributions and the range of savings provided by this measure would be greater or smaller. Second, projected City savings might be reduced if future labor negotiations or arbitration awards result in any salary increases to offset higher employee retirement contributions. Third, to the extent that changes to pension formulas in this measure cause employees to delay or speed up retirement dates, this could provide additional City savings or costs related to retiree pensions and health insurance subsidies.

Nonpartisan Information

League of Women Voters

Video and Pro and Con for Prop D

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Arguments For Proposition D Arguments Against Proposition D

PROP D Delivers: Real Pension Reform and $1.7 Billion in Savings. San Francisco's pension system is in crisis. The city's pension costs for employees will balloon by $400 million in the next four years alone. Taxpayers like you will have to shoulder this massive increase. The pension crisis will lead to huge cuts in vital services like education, massive tax hikes, or both.
PROP D is the only proposition that delivers real pension reform for our City. It saves taxpayers $1.7 billion over the next 10 years. It is fiscally responsible reform that is sustainable and fair to all. It is the only pension reform that secures our fiscal future while protecting vital services and holding down taxes.
The City needs pension reform. Prop D will do pension reform right and won't kick the can down the road.
Prop D delivers savings that will be used to fund schools, parks, MUNI, street repairs, jobs and senior services. Prop D delivers a fair and real solution to the City's pension crisis by:

Avoiding cuts to schools and education
Ending the abuse of pension "spiking" by averaging the last five years of an employee's salary rather than one.
Protecting city workers who earn less than $50,000 a year by exempting them from any increase.
Providing the most balanced cost sharing between city workers and taxpayers.
Eliminating "bonus" benefits that cost taxpayers $170 million.
Requiring elected officials to pay towards their pensions.
Allowing changes to the law, if and when times get better Prop D does not affect worker's collective bargaining rights. Vote YES on Prop D to deliver pension reform that is fiscally responsible, sustainable and fair to all. We need to do pension reform right and do it once to save the City's future.

Public Defender Jeff Adachi* Craig Weber, Proponents

For identification purposes only; author is signing as an individual and not on behalf of an organization.

Rebuttal to Arguments For
D is Deceptive: Vote No D cannot deliver on its promises. It's deceptive to voters and it's illegal and will leave the city with zero savings. We need to make sure that whatever legislation is passed reforms our benefit structures and is not tossed out by the courts. San Francisco needs savings, not a legal battle.
D is playing politics with the livelihoods of thousands of people Using a hot button issue as a springboard for higher office is not how complex policy decisions affecting tens of thousands of people should be determined. They should be determined through deliberation, not decree,and reform of this nature certainly should not be bankrolled by right wing billionaires that have demonstrated their anti-union motives in Wisconsin and Ohio.
D fails to reform health care benefits and exempts certain classes of employees D is not comprehensive reform. Addressing the city's pension problems is only half the battle, especially given San Francisco's $4 billion unfunded health care liability. Failure to address health care ensures another fiscal crisis in the years ahead. D also exempts over 1,000 high-paid employees and unnecessarily targets public safety professionals with severe contribution hikes.
Vote No on D There's a reason virtually every elected official, the business community, non-profit and labor says vote no on D: It's poorly written, illegal, not comprehensive and bad for San Francisco. Vote No.
Mayor Ed Lee Supervisor Sean Elsbernd San Francisco Labor Council San Francisco Firefighters Local 798 Dennis Kelly, United Educators of San Francisco*

For identification purposes only; author is signing as an individual and not on behalf of an organization.
Virtually Every Elected Official Agrees: D is Deceptive,Vote NO on D Prop C was written with community input and drafted by the City Attorney's office to conform with the City Charter. Prop D? Not so much. It was written behind closed doors by a politician with no understanding of pensions, giving us flawed legislation that won't stand up in court, leaving taxpayers with zero savings. D is Illegal and Deceptive to Workers As written, D raises contribution rates on current employees, but fails to include offsetting reductions in employee contributions in good economic times when the City's costs are reduced. D is not only unfair, legal experts say it's unlawful and will be invalidated by the courts, leaving taxpayers with zero savings.
D also lacks most of the features required of a qualified pension plan. So unlike the extensive new plan provisions of Proposition C, the "new" plan under D cannot be administered in accordance with federal law, again leaving the City with zero savings.
D is Deceptive to Voters D never addresses San Francisco's $4 billion unfunded retiree health care liability and guarantees another fiscal crisis. In fact, D was put on the ballot by signature gatherers that were paid $5 a name and got caught on tape lying about what the measure would do.
D is Deceptive to San Francisco Values: No on D Prop D is funded by Wall Street billionaires who have donated thousands in campaign cash across America to dismantle the rights of workers and force an end to unions as we know them. D is Deceptive. Vote No on D.
Mayor Ed Lee Supervisor Sean Elsbernd San Francisco Labor Council San Francisco Firefighters Local 798 Dennis Kelly, President, United Educators of San Francisco* San Francisco Planning and Urban Research (SPUR)

For identification purposes only; author is signing as an individual and not on behalf of an organization.

Rebuttal to Arguments Against
Proposition D is a fair, comprehensive, and effective pension reform measure that was put on the ballot by 49,000 San Francisco voters. Here are the truths that the opponents cannot deny:

Proposition D saves $400 million more than their plan. This is a fact they don't mention. This money can be used to protect our schools and basic services and ensures that the pension system doesn't bankrupt the City.
Proposition D saves jobs. The money Prop D saves each year can be reinvested in workforce development and getting our City back on the road toward economic recovery.
Prop D stops pension abuses: Last year, a city employee earned $516,000 and retired with a $240,000 pension. This will stop under Prop D, which caps pensions.
Prop D contains no "side deals." The opponents' plan relies on a side deal that gives a 4% raise to safety employees to pay for their 3% contribution. This deal will cost taxpayers $127 million over the next ten years!

Don't let the opponents scare you:

Not a single voters' signature was invalidated because of improper signature gathering.
Last year, a San Francisco Superior Court ruled that the City could change contribution rates of its employees in order to protect the fiscal integrity of the system,which is what Prop D does.
Prop D is funded by small and large donors.
Prop D's does not increase health care costs.

Vote YES on Prop D. It delivers real, effective pension reform.
Jeff Adachi & Craig Weber, Proponents

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Created: January 20, 2012 12:03 PST
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