San Francisco is hardly alone in sitting atop a ticking time bomb of unfunded municipal employee benefit IOUs. However, new projections from the City Controller’s Office show in bleak clarity how our current expenditures have become impossible to sustain in today’s tougher economy.
The City’s next budget must somehow neutralize a shortfall of more than a half-billion dollars while public employee pensions, salary costs and health care benefits that are expanding uncontrollably.
Ten years ago, The City’s health insurance spending for active workers and retirees, plus pension contributions and Social Security, was $383.7 million. This year, it’s estimated to more than double to $890 million. And it’s forecast to reach $1.4 billion by fiscal year 2013-14.
In calendar year 2009, pay for The City’s approximately 26,000 employees accounted for about one-third of the $6.6 billion budget.
Benefits made up some 40 percent of employee compensation — currently averaging more than $12,000 a year per worker for health premiums alone.
The City currently spends an average of $1,005 a month on health premiums per worker. This is expected to increase to $1,017 a month in the fiscal year beginning July 1, according to the City Controller’s Office. The employee-paid share of monthly health premiums ranges from $0 if there are no dependents to $545.86 for a worker with two or more dependents. California’s 10 most densely populated counties average a $473 contribution to the health premiums of an employee without dependents, in a range of $364 to $608. Meanwhile, San Francisco’s health care contribution ranges much higher, from $594 to $1,133 a month.
San Francisco can no longer afford such well-meaning but excessively generous benefits. Basic municipal services such as police, fire and road maintenance are on the verge of being squeezed out by swollen costs of employee health care and other benefits.
What needs to happen now is The City must bring its health care contributions more in line with other public agencies and the general market. Since today’s San Francisco process requires negotiating benefits with 44 different labor unions, it’s highly unrealistic to expect sudden remedies. Improvement must be made in steps.
Voters approved a measure in 2008 to end The City’s practice of fully funding a new hire’s retirement benefits after just five years of service. In the June election, voters will be asked to approve another measure designed to reduce pension costs during the next 25 years by raising new hires’ employee contribution shares. More such fixes will be needed to prevent health benefit promises from simply overwhelming the entire general fund.