All eyes are on San Francisco, and for good reason. On Tuesday, voters will elect The City’s next chief executive in its first competitive mayoral contest to use ranked-choice voting. The outcome will be significant. The new mayor will set the tone at City Hall, preside over negotiations with every major city union, and influence key policy initiatives for years to come. But two measures on the ballot are equally important to the long-term fiscal health of The City: Propositions C and D for pension reform.
Like many cities, San Francisco’s once-robust pension plan is now seriously underfunded. According to the city controller, San Francisco will spend $375 million for retiree pay this fiscal year and $532 million by 2014. The unfunded liability for retiree health benefits is even more staggering, estimated to reach $4.4 billion over the next decade. Clearly, we cannot afford to wait when it comes to pension and health plan reform.
Prop. C will save The City between $1 billion and $1.3 billion over the next 10 years, according to the city controller. It will achieve these savings by limiting cost-of-living adjustments, reducing pension benefits for new hires and increasing employee contributions. The amount employees contribute may decrease over time depending on the rate The City must pay into the plan. Under Prop. C, city workers will also be required to contribute to a health care fund for retirees.
Prop. D would also limit cost-of-living adjustments and reduce future pension benefits. However, a key point of distinction is that it would increase retirement contribution rates for most current city employees without any possible rate reductions as pension plan fund balances improve — an issue that has sparked heated legal debate over the vested rights of city workers. Although Prop. D could save The City up to $400 million more according to the controller’s analysis, it may violate state law, putting The City at risk for a costly legal challenge we simply can not afford.
As result, the San Francisco Chamber of Commerce endorses Prop. C. This measure was placed on the ballot by Mayor Ed Lee and a united Board of Supervisors, with the support of a broad coalition of business and labor groups. It will address both rising pension and health benefit costs.
Most importantly, it would withstand any legal challenge that would further delay these urgent reforms for our city.
Unfortunately, voting in pension reform on Tuesday’s ballot is not as simple as it should be. The proposition with the most yes votes will become law. The other will be nullified. Voting no on both propositions will send The City back to the drawing board, allowing growing pension obligations to continue to eat away at The City’s general fund and the vital city services it supports.
Undoubtedly, many voters are angry that they must evaluate competing measures to solve the same problem — especially on a topic as complicated as pension reform. Many others are likely confused about the similarities and differences between propositions C and D.
While the Chamber had hoped a compromise measure could be reached before Election Day, politics prevailed and now voters are stuck with two choices for pension reform as they head to the polls.
At the end of the day, Prop. C is the better choice for San Francisco. It is a practical policy developed through consensus that will address our city’s unfunded pension and health benefit liabilities. Its passage will set The City on a long-term course for fiscal stability.
The pension time bomb is ticking. San Francisco can not wait to enact reforms. Nor can we afford to have these reforms tossed out by the courts and go back to the drawing board. Now is the time to act. Please join the San Francisco Chamber of Commerce, Mayor Ed Lee, the Board of Supervisors and the labor community in voting yes on C and no on D.
Steve Falk is president and CEO of the San Francisco Chamber of Commerce.