Savings Gap between Competing Pension Proposals Narrows
San Francisco's pension fund saw banner gains this year, according to new estimates
San Francisco's pension fund is expected to post banner gains this year, significantly lessening the city's ballooning pension costs and narrowing the cost-savings gap between two competing pension-reform proposals. According to estimates released Tuesday morning by San Francisco Controller Ben Rosenfield, this may substantially ease the amount the city will be required to pay into the fund in coming years.
Proposals from both Mayor Ed Lee and Public Defender Jeff Adachi appear headed toward the November ballot. Based on earlier estimates from the controller's office, Adachi has said that his plan would save the city $500 million more over the next decade.
But if city's pension fund posts a 25 percent gain this year, Rosenfield reported, and if the fund from garners from then on a 7.75 percent annual return, the city's obligations will decrease substantially in the coming decade, to $4.4 billion from $6.6 billion. The 25 percent return is not a given; the unaudited figure stands at about 21.5 percent. The controller's office was not able to generate an actuarial estimate based on the 21.5 percent figure.
In that scenario, the city's plan, which would increase city workers' pension contributions, would save the city $968 million over a decade, while Adachi's plan would save $1.225 billion, narrowing the savings gap between the two to $257 million.
In a second, gloomier scenario, Rosenfield's office, which is charged with offering nonpartisan data, said that if the pension fund saw a much-lower return over the next decade — just 4.5 percent through 2014-2015 and 7.75 percent thereafter — then Adachi's plan would save $336 million more than the city's plan over the next decade.
The controller also credits the mayor's plan with $75 million in savings over 10 years from increased employee contributions to the retiree health care trust fund. As of last year, the city had a $4.4 billion unfunded liability to provide its retirees with lifelong health coverage.
The Board of Supervisors will meet Tuesday afternoon to discuss and possibly approve the mayor's proposal, which was the product of months of talks between City Hall, labor groups and civic leaders, including Bay Citizen chairman Warren Hellman.
Adachi was excluded from those negotiations, but has said repeatedly that he would drop his own pension-reform initiative if the City Hall plan generated adequate cost savings. Adachi was not immediately available to comment on the controller's new estimates.
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RB Orbust
It's ridiculous to assume the pension fund is going to average an 8% investment return "from now on." It is what Bill Gates calls "Enron accounting." It is logical the investment fund would earn a high investment return temporarily following billions in losses.
A question for Elizabeth: Why do you deem it unnecessary to disclose that this analysis is being done by high paid City employees like the Controller Mr. Rosenfield who will personally have to make significantly higher pension contributions under Mr. Adachi's plan?? Assuming Rosenfield (and his colleagues) earned say around $200,000 that is up to $10,000 more out-of-pocket per year to pay into the fund. How is this not significant and not subject to routine conflict of interest disclosure?
Seej Cane
What about over 25 or 50 years? Obviously City employees are going to pick a time frame (ten years) most favorable to them.
Adachi caps pensions at $140,000 (versus $200) and determines pensionable income by averaging last FIVE years worked - this will save HUGE dollars over the long haul.
A ten-year time frame doesn't really account for reforms with New Hires.
Read the City's Prop B 2010 pension reform initiative, for example. The Controller calculated savings over TWENTY FIVE YEARS. Would it not make more sense for the Controller to be consistent and NOT make it look like the City is manipulating the analysis by using a much shorter time frame in this instance??
the cheap seats
I understand where you're headed with this, and frankly it's in the interest of everyone involved to look that far out. Well, except maybe the politicians (including Adachi.)
The problem is that it's very difficult to project that far out. The bulk of the savings for either plan is made in the short term, while the pension system is underfunded. Without the ability to accurately predict the future of the economy, it would be irresponsible to put numbers on either plan.
And 7.75%? That's basically "market average." Not too difficult to attain by putting your money in some reasonably safe investments and letting them ride.
Long term stock market data looks like this:
Last 20 years= 10.2%
Last 25 years= 11.2%
Since 1932= 11.2%
Since 1929 (including the crash)= 8.8%
Since 1900= 9.4%
Sure, past performance doesn't guarantee future gains, but over the last 110 years there's just a bit of consistency. ;-)
Mission Rosalind
Don't forget, most average annual return calculations (you didn't say where you got your numbers) assume reinvestment of dividends. There is a good chance a pension plan would use a significant portion of its dividends to pay benefits and cover administrative costs, so I would say the LT market returns are an upper-end estimate at best. Even more so because it is unlikely a pension plan would be 100% invested in stocks. Fixed income holdings are going to drag the annual return down even more.
h. brown
Hellman is right,
There would be no Pension Reform without Jeff Adachi.
Adachi for mayor!
h.
John Smith
H Brown, I'm surprised that you support someone who uses such crooked campaign methods. . .
the cheap seats
Adachi is a victim. His signature gatherers are victims. The citizens are victims. H. Brown is a victim. See the correlation?
John Smith
It's interesting that Ms. Steven's has covered almost every detail of the pension debate but failed to even mention the fact that Adachi's campaign was caught red handed lying to the public to get enough signatures for his measure to qualify. Read more about it here:
http://www.sfgate.com/cgi-bin/blogs/cityinsider/detail?entry_id=93123
RB Orbust
She also didn't report that the police arrested Adachi signature gatherers...
And I don't recall the POA's paid signature gatherers saying:
"Sign here so the police can collect a salary and a pension at the same time at a cost to taxpayers of $50 million."
the cheap seats
Mr. Smith provided a reasonable amount of evidence to support his claim. Can you, Mr. Orbust?
RB Orbust
"Evidence?" Edited clips of what, 3 out of 300 signature gatherers where uneducated sig gatherers were baited into answering questions about complex legislation?? That's evidence of what? Please waste your campaign resources filing a lawsuit.
See testimony before the Police Commission where it's apparently a recent development to Chief Suhr that citizens have a right to petition:
http://www.sfexaminer.com/local/2011/07/signature-gatherers-san-franciscos-pension-measure-accused-lies
John Smith
Baited? They clearly just made stuff up to make $5 bucks a signature. And at least four of the Adachi campaign where caught lying(watch the video). The fact that you are trying to defend their behavior totally discredits anything you say.
Also the fact that Adachi had to hire 300 signature gatherers who were "uneducated" on his own measure shows that this is not a grassroots effort supported by San Francisco voters.
the cheap seats
Considering what I heard in front of the Safeway on Market at Church, I'd say the video is accurate for the majority of petitioneers. I never heard the same pitch twice, and only twice did I hear someone pitch it somewhat accurately.
the cheap seats
"Lt. Troy Dangerfield said police received complaints that Lapham, 34, and fellow signature gatherer Willie Wright, 33, were blocking the entrance to the store."
There is a difference between having a right to collect signatures and blocking the doors of a business. The article suggests that the two petitioneers were arrested for collecting signatures, but they weren't, they were arrested for trespassing- for blocking the doors of the store. While I'm not the kind to immediately believe in conspiracies, I'd say that the two were probably asked by the store to move on, or at least not block the doors, and when they didn't, were arrested. Of course the reporter didn't bother to clarify that, did he? Only the police report will tell.
RB Orbust
Back to the substance of the measures:
A vote for Elsbernd's plan is a vote to affirm $200,000 pensions for City employees (Adachi caps at $140,000) when the pension fund is $4 billion underfunded - in a word: absurd.
Then for good measure Elsbernd decided to strip health care from the City's retirees and they are going nuts. There is simply no reason to drag retirees into this - he*l, I don't even support cutting their benefits.
If you can guys can dupe the voters on this one - I gotta hand it to you...
the cheap seats
Oh, I see. Change the topic- then when you're on the spot without a place to hide, it "back to the substance!"
In your own words, you think it's okay that someone who retired last year based on a $200,000 salary collects the full amount for life while an employee who put in the same number of years at the same salary who retires next year gets considerably less. Talk about double-standards.
RB Orbust
That is not how it works. An employee who gets HIRED next year would be subject to the $140,000 cap which makes perfect sense in my book when it is perfectly clear the City cannot sustain $200,000 plus pensions...
Elsbernd/Lee/Union plan maintains $200,000 pensions for new hires which makes no sense.
h. brown
Hey John,
How's it working out with Pocahontas?
What's your real name?
go Giants!
h.
John Smith
You always avoid the hard questions . . .
h. brown
'John'?
Giving your name is asking you a hard question?
Nothing personal, whomever you may be but you're just one of the first of dozens who'll show up on these sites once Adachi announces.
Not that I have any advance info.
Again, what's your name?
Here's a prompt:
http://www.youtube.com/watch?v=ivz41dd_P2g
the cheap seats
Hey, H.Brown...
Why don't you post up your finances on the internet for everyone to see. Tell us how much you make, how much overtime you earn, and how much you earned last year. Then, let us analyze you for what you do and how much you make. We can then ridicule you for it. We can tell you that you earn too much for what you do even though we really have no idea what it is you're actually doing. Then we can search through any number of people finders, get your home address, your email address, and follow you around enough to make your life miserable, but never *actually* breaking the law to the point where anyone will prosecute you. Or worse, some reporter gets ahold of your info.
Wonder why city employees won't ID themselves here? It's because all our info is published online for people like you who feel that it's your business to know that kind of stuff about us. Yet another double standard imposed by the "people."
...and don't think that the story above is a stretch. It's happened more than once.
h. brown
Hey 'Cheap Seats',
I live at 44 McAllister in Room 415. Been here almost 6 years. Retired school teacher/firefighter/sailor ... paid into Social Security for 47 years doings some of the toughest jobs in the country and I get 865 dollars a month. My email is h@ludd.net. My phone is (415) 621-4103.
And, unlike yourself, I'm not a coward.
Adachi for Mayor!
Was I right about Brandon Belt?
And, Posey?
And, Bumgarner?
Adachi for Mayor!
Gonzalez for Mayor!
Tippacanoe and Tyler Too!
h.
the cheap seats
Wow, you really got screwed by the Teacher's Union if you're not getting a pension from that. Also by the Firefighter's union.
See how easy that was? You're still not gonna get my name.
the cheap seats
...and I'm not the type to go on campaign against you...
h. brown
Cheapo,
I've been married and divorced 6 times and at 67 I still owe on student loans so I probably wouldn't notice if you were 'campaigning' against me.
My unions were good. I just never worked anywhere over 5 years. Don't regret it and my friends and political hobbies more than make up for my meager fixed income. I house sit a couple of months a year here and there and sometimes have weeks alone with a pool so that's a nice break from the Tenderloin. I'm a healthy and happy person and you can't ask for more.
Giants start in 3 minutes!
h.