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Union Group Produces Long-Awaited Pension Proposals

Plan, which would save San Francisco up to $200 million, is "not something to celebrate," union leader says

A dozen or so well-intentioned people. Dozens and dozens of meetings. A hired-gun Deloitte actuary flown in from Chicago at considerable private expense. The mission: Devise a solution for the toll that ballooning employee pension and benefits costs are taking on San Francisco’s battered finances.

For the last six months, the leaders of the city’s most powerful labor unions, under the aegis of investor and philanthropist Warren Hellman (who is also the chairman of The Bay Citizen but plays no editorial role), have been working to make good on a promise made last fall to come up with their own solution to the financial crisis arising from the city’s employee costs.

And Tuesday night, after an occasionally tense six-hour session at the San Francisco Police Officers Association building on Bryant Street, the unions, at last, agreed on the outlines of a plan to offer the city and try to sell to their 20,000-odd members.

That will not be easy. Hellman, who declined to comment for this story and who did not attend Tuesday’s meeting, said in an interview in February that the group would need to produce annual savings of $300 million to $400 million to put the city’s finances to rights.

The union group’s plan falls fall short of that goal, with anticipated near-term financial savings of between $100 million and $200 million. But that money represents real sacrifices from city employees, say the union leaders, who also say that tax increases will have to play some role in a fiscal solution.

And, given employees’ legal rights to benefits they were promised when originally hired, the unions maintain they can't ask much more of current employees. Still, pushing the bulk of the sacrifices on to the not-yet-hired is troubling for some. "Whatever cynicism there is in the labor movement, there is some attachment to idea that you don’t sell the unborn to solve your problem today,” said Rebecca Rhine, chief of the Municipal Executives Association, which represents the highest-ranking city executives, in an interview Wednesday afternoon. “No one feels good creating a model that's horrible for future employees. "

The proposals, which were provided to The Bay Citizen in an exclusive preview, are a big step forward in the unions' making good on their election-season promise. They know change is inevitable; they would just prefer that the changes be of their own design.

“Labor is recognizing that issues in retirement and health care need to be fixed, adjusted, reformed,” said Sean Connolly, a deputy city attorney who heads the Municipal Attorneys Association of San Francisco, one of the unions involved in the Hellman group. “In any business, in any world, there comes a time where the structure needs to be fixed. Whether we like it or not, now became that time. Labor is prepared to eat a lot here.”

Union leaders involved in the Hellman group say their proposals translate to a 12 to 15 percent reduction in the value of the benefits offered to new employees. Existing employees would see a decrease closer to 5 percent. Connolly said in an interview Wednesday afternoon that the Hellman group proposal will produce $1 billion in savings for the city over the next 20 years. “The labor unions in San Francisco are going to the city and saying, ‘We are going to give you our money,’” Connolly said.

The bulk of the savings would come from significantly boosting the percentage of an employee’s paycheck that he or she contributes to the city’s pension fund. That fund, which lost billions of dollars in assets in the recent market downturn, must be made whole by the city. Currently, most city employees pay or will soon pay 7.5 percent into the fund. That percentage will rise to about 10 percent or 11.5 percent under the union proposal. More-recently hired police and firefighters, who now pay 9 percent, could see their contributions rise to 13 percent of their paychecks. All told, this change alone would generate about $100 million in annual savings for the city.


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