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Retiree Health Care Trust Fund
City of San Francisco
Majority Approval Required
Pass: 61790 / 68.7% Yes votes ...... 28151 / 31.3% No votes
Index of all Propositions
|Information shown below: Summary | Fiscal Impact | Yes/No Meaning | Arguments ||
Shall the City change its Charter to allow payments from the Retiree Health Care Trust Fund only when the Trust Fund is fully funded or only under specified circumstances?
The City and its employees make contributions to the Fund. The Trust Board may not use these contributions to pay for retiree health care costs until January 1, 2020.
The San Francisco Unified School District, San Francisco Superior Court, and the San Francisco Community College District can also choose to participate in the Fund. Currently, the Community College District is the only agency, besides the City, that participates in the Fund.
The City has its own account and contributions from each agency are placed into separate accounts.
The Proposal: In an attempt to keep the Trust Fund from being depleted, Proposition A would allow the Trust Board to make payments toward City retiree health care costs from the City's account in the Fund only if:
Should the proposed Charter amendment be approved by the voters, in my opinion, the City's ability to withdraw from the Retiree Health Care Trust Fund (the "Trust Fund") would be restricted. The restrictions would ensure that the Trust Fund more rapidly accumulates sufficient funding and investment earnings to pay for required City retiree health costs and would therefore reduce the burden of these costs on the City's annual budget.
The City currently pays for the health care benefits of retired employees through the annual budget. These expenses are now approximately $150 million annually, or about six percent of payroll expenditures, but are expected to grow over time to approximately $250 million, or about ten percent of payroll expenses. Instead of bearing this cost in the annual budget, as a sound financial management practice, employers can instead set-aside funds during a worker's career and use investment income from those funds to pay for the benefits.
Through earlier Charter amendments, the City established a Retiree Health Care Trust Fund into which both the City and employees are required to contribute funds. Deposits are now required on behalf of employees hired after 2009 and, beginning in 2016, will be required on behalf of all employees. No withdrawals are currently permitted from the Trust Fund until 2020, ensuring that the balance will grow until that time, however no such prohibitions are in place following that date. The City's most recent actuarial analysis estimates that the cost of health benefits already earned by current and future retirees as of July 1, 2010 is $4.4 billion, of which only $3.2 million has been set-aside to date.
The proposed Charter amendment would prohibit withdrawals from the Trust Fund until sufficient funds are set-aside to pay for all future retiree health care costs as determined by an actuarial study. Limited withdrawals prior to accumulating sufficient funds would be permitted only if annually budgeted retiree health care costs rise above ten percent of payroll expenses, and would be limited to no more than ten percent of the Trust Fund balance. The proposed Charter measure allows for revisions to these funding limitations and requirements only upon the recommendation of the Controller and an external actuary, and if approved by the Retiree Health Care Trust Fund Board, two-thirds of the Board of Supervisors, and the Mayor.
The City's external actuary has estimated that given these proposed provisions, the Trust Fund would be fully-funded in approximately 30 years. At that time, the City's annual costs would drop to approximately $50 million in current dollars or about two percent of payroll expenses. Current and future projections of the benefit costs and of the Trust's status are dependent on assumptions of future medical inflation, investment returns, and other trends, which will likely differ from those assumed. Higher rates of medical inflation or lower rates of investment returns would delay the shift to a fully-funded Trust Fund.
The proposed Charter measure also; (1) further clarifies the required segregation of moneys within the Trust Fund into sub-trusts for other participating employers such as the School District, (2) limits withdrawals from these sub-trusts by other participating government employers until their governing board has adopted a funding strategy by a two-thirds vote, and (3) allows the Treasurer, Controller, and General Manager of the Retirement System to serve on the Trust Fund Board, rather than appoint members to the Board.
League of Women Voters
|Arguments For Proposition A||Arguments Against Proposition A|
|Proposition A Protects Health Care Benefits Owed To
City Retirees, While Securing San Francisco's Financial
Proposition A creates a lockbox to secure the Retiree Health Care Trust Fund (RHCTF) so that money set aside for health care benefits promised to retired city workers cannot be raided by the City for other purposes.
Proposition A protects the Health Care Trust Fund to ensure San Francisco can meet its commitment to provide health care for retired workers including firefighters, police officers and nurses who made sacrifices to protect our community. San Francisco made a commitment + these retired workers are depending on that commitment.
To honor our commitment to San Francisco's retirees:
Join us in honoring our commitment to our retirees, vote Yes on Proposition A!
Mayor Ed Lee Supervisor John Avalos Supervisor London Breed Supervisor David Campos Supervisor David Chiu Supervisor Malia Cohen Supervisor Mark Farrell Supervisor Jane Kim Supervisor Eric Mar Supervisor Katy Tang Supervisor Scott Wiener Supervisor Norman Yee
1. It's no "lockbox". The city can immediately draw against the trust fund, even though it's underfunded. Currently, the trust fund is off limits until 2020. No more under Proposition A. Withdrawals are allowed if the city's retiree health care costs exceed 10% of payroll, about $130 million. The SF Chronicle notes the city will exceed the target every year for the foreseeable future.
2. It won't protect retiree health care money from misappropriation. RHCTF funds are reserved for retiree health care costs under today's law. Proposition A doesn't change that.
3. It won't close the city's retiree health care deficit, nor protect future generations. Proposition A won't protect taxpayers from rising health care costs, and low withdrawal limits mean the supervisors will mismanage the RHCTF.
4. The savings from A benefit the city's highest-paid employees, like the supervisors. Their health care plans will be off limits for budget cuts, meaning providers can bill city taxpayers excessively. Basic services like police and fire get no such protection.
5. Even the Author of A admits the city leaders backing it want to "raid" retiree health care money. Why should you trust them to protect what they've said they'd rather spend?
Proposition A will protect health plans of imminent retirees like the supervisors, but threaten them for later retirees. Surely elementary teachers don't want their students funding their retirement benefits.
Please join us in voting NO on A.
Libertarian Party of San Francisco
|There is a key sentence in this Charter Amendment
that isn't mentioned in the ballot summary. It appears
twice, once with respect to employees hired on or
before January 9, 2009, and once with respect to
employees hired after that date.
That sentence reads as follows:
"In the event that the contribution rates set forth above do not cover the entire Normal Cost, the Employer shall contribute the balance into the RHCTF (Retiree Health Care Trust Fund)."
What this means in plain English:
If retiree health care costs end up not being fully covered by the 2% or less of their salaries that city employees are required to pay toward those costs, their employer + YOU, the taxpayer + will be required to make up the difference!
Even if the city were near bankrupt, with schools closing, roads full of potholes, hospitals falling apart, parks full of trash and weeds, and police and fire protection virtually non-existent, it wouldn't matter. The gold-plated health care plans provided to people who worked for the city decades ago, and their dependents, would still have first claim on your tax dollars if Prop. A passes.
We say let them share an uncertain future with the rest of us. Vote NO on Prop. A.
Libertarian Party of San Francisco
P.S. + If a ballot measure is too long, unclear, confusing, or complicated, it's best to vote it down. If you don't understand it, it's irresponsible to pass it.
In 2011, City employees agreed to pay a larger share of their earnings towards their retirement health care. Prop A protects these funds set aside for retiree health care so they don't get depleted.
By changing from a pay-as-you-go model to a system where funds are set aside and allowed to grow through investments, the contributions of today's workers will help build funds for their future retirement health care costs.
Proposition A will result in major cost savings for San Francisco. While other cities struggle to pay for retiree health care, San Francisco is taking steps to make sure it can fulfill its obligations when the time comes.
City workers and retirees, including firefighters and police, as well as businesses, Democrats and Republicans all agree that Prop A is good for employees and retirees, and good for the City's financial future.
By voting Yes on Prop A, you can help ensure that we honor our commitment to retirees without passing on years of accumulated health care costs to future generations.
Vote YES on Prop A.
Mayor Ed Lee (For identification purposes only; author is signing as an individual and not on behalf of an organization.) Supervisor John Avalos Supervisor London Breed Supervisor David Campos Supervisor David Chiu Supervisor Malia Cohen Supervisor Mark Farrell Supervisor Jane Kim Supervisor Eric Mar Supervisor Katy Tang Supervisor Scott Wiener Supervisor Norman Yee