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S.F. Establishment Hits Pension Reform

Steven Greenhut
Vice President of journalism, Franklin Center for Government and Public Integrity

Crossposted CalWatchDog

To outsiders, liberal San Francisco may seem preoccupied with leftist protesters occupying prime real estate in the Financial District or with debating proper restaurant etiquette for the city’s small but flagrant nudist population, or until recently, with arguing whether male circumcision should be outlawed. But the prospect of bankruptcy focuses the mind, even in a city so obsessed with leftist causes celebres. When San Franciscans head to the polls on November 8 for a municipal election, the big question facing voters will be how to fix the city’s crumbling public-pension program.

The ballot contest centers on competing reform initiatives: Proposition C, the so-called “City Family” measure backed by Democratic Mayor Ed Lee and the city’s public-employee unions, versus Proposition D, advanced by San Francisco’s pension-reforming public defender, Democrat Jeff Adachi. Adachi’s previous pension-reform effort, Proposition B, failed last November. Now Adachi, running for mayor against Lee and nine other candidates, is waging a courageous reform-based campaign. Prop. D requires higher worker contributions than Prop. C and, more significantly, would roll back pension benefits.

Prop. D is clearly the better of the two initiatives, which is why city officials are taking no chances that Adachi’s reforms will prevail over the establishment’s compromise half-measure. Mayor Lee pulled a sneaky behind-the-scenes stunt to ensure that Adachi’s measure would be less effective, even if it wins the most votes. Under a memorandum of understanding Lee negotiated with the police and firefighter unions in July, most of the city’s highest-paid workers would be exempt from the provisions of Prop. D that require higher pension-contribution rates. Despite an exposé by the San Francisco Examiner and ensuing controversy, the city’s board of supervisors unanimously approved the memorandum.

Anti-Democratic
Adachi rightly was appalled at the anti-democratic nature of a secret deal exempting particular classes of public workers from a ballot measure that the public hasn’t even had a chance to consider. He also was angered at the way the city’s controller, a Lee ally, skewed a supposedly independent analysis of the two measures to minimize the expected savings from Prop. D. The controller used a 10-year timeframe to analyze savings, rather than the previously used 25-year timeframe, even though the savings would increase dramatically in the “out” years because the reforms would apply mainly to new hires.

San Francisco’s business leaders have signed on to the “City Family” measure in the misbegotten belief that the scorpion wouldn’t sting the frog this time. No such luck. San Francisco Chamber of Commerce President Steve Falk worked closely with city Labor Council chief Tim Paulson on behalf of Prop. C. The Labor Council repaid the Chamber’s ingenuousness by backing a proposed ordinance that would dramatically increase the costs of compliance with the city’s health-care mandate. Nevertheless, the Chamber maintains its support for the “City Family.”

Naturally, San Francisco’s mainstream press fully supports the “City Family” initiative. As the San Francisco Chronicle editorial board explained, “The very fact that business and labor leaders are supporting Prop. C bodes well for its passage and acceptance—and sets the stage for productive, mutually respectful talks on further reforms that will almost certainly be needed to address this pension and health-care shortfall.”

In truth, little reform is at work here. Since when have unions participated in “productive, mutually respectful talks” to roll back the pension and health benefits that are bankrupting their communities? Furthermore, the editors try to confuse readers by downplaying the differences between Props. C and D. “San Franciscans should have no illusions about the dueling reform measures on the Nov. 8 ballot: Neither would come close to covering the escalating general-fund obligation to meet promised pensions and health-care coverage for retired city workers,” they write. “Propositions C and D offer only modest down payments on the reforms that must be pursued to keep these retirement costs from overwhelming the city’s ability to maintain basic services.” Most readers, after concluding that neither initiative would solve the problem, would embrace the tougher measure. The Chronicle, however, would rather support the “City Family” over Adachi’s stronger reform measure.

San Diego Reform
The landscape is quite a bit different 500 miles down Interstate 5 in San Diego, where voters will consider a pension reform initiative next June. Though “America’s Finest City” is more conservative than San Francisco, city leaders until now have been just as irresponsible in handling their public-employee pensions. But faced with a $2.1 billion unfunded liability, reformers brokered a far-reaching compromise in April with Mayor Jerry Sanders and the political establishment that would switch all new city hires—except for police officers—from a defined-benefit pension plan to a 401(k)-style defined-contribution plan. The move, according to a recent analysis, would save taxpayers between $1.2 billion and $2.1 billion after 27 years.

Republican city councilman Carl DeMaio and his supporters last month submitted more than 145,000 signatures to put the April compromise to a vote. The unions strongly oppose DeMaio’s measure, which is a good sign it might actually make a difference. Unlike San Francisco’s compromise measure, however, the San Diego campaign is shaping up to be a clear-cut battle between reformers and unions.

San Francisco and San Diego show how the pension-reform battleground has shifted from union-dominated Sacramento to the localities. Public opinion is shifting, too. Last November, voters passed eight out of nine pension-reform measures at the local level, including in some communities that are anything but conservative. It’s no wonder, then, that the unions and their Democratic allies tried repeatedly in the last legislative session to impose significant restrictions on the use of the initiative. Reformers can succeed, but they need to remember that the “Family” won’t surrender without a fight.

Note: The following first appeared in City Journal-California.

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