Archive for October, 2011

SF ballot measures: will courts revisit pensions?

October 24, 2011

SAN FRANCISCO — One of two competing pension measures on the San Francisco ballot next month is said by opponents to be an illegal assault on the “vested rights” of public employees, a cost-cutting plan certain to be overturned by the courts.

The measure does not raise the issue that the Little Hoover Commission and others say urgently needs a new look by the courts: whether the pensions of current workers not yet earned by time on the job can be cut.

But Measure D by Jeff Adachi, the city public defender, does raise the annual payments employees must make toward their pensions without bargaining or providing an offsetting benefit.

“As written, D raises contribution rates on current employees, but fails to include offsetting reductions in good economic times when the city’s costs are reduced,” said a ballot pamphlet rebuttal written by Mayor Ed Lee and others. “D is not only unfair, legal experts say it’s unlawful and will be invalidated by the courts, leaving taxpayers with zero savings.”

In a ballot pamphlet reply, Adachi urges voters not to let the opponents “scare” them: “Last year, a San Francisco Superior Court ruled that the city could change the contribution rates of its employees in order to protect the fiscal integrity of the system, which is what Prop D does.”

Whether voter approval of Measure D on Nov. 8 would result in a court ruling making a significant statewide change in case law is not clear.

Many legal experts, but not all, believe that a series of past court rulings mean that pensions promised state and local government employees on the date of hire cannot be cut without providing other benefits of equal value.

The Little Hoover Commission said the standard attempt to curb soaring pension costs (raising worker contributions and lowering new-hire pensions) does not yield enough savings for cities and other government employers in deep financial distress.

Last February the commission recommended that the Legislature give state and local governments the authority to cut pension amounts earned by current workers in the future, while protecting pension amounts already earned by years on the job.

The legislation presumably would be challenged in court. A challenge is likely if San Diego voters approve an initiative next June that switches new city hires to 401(k)-style plans and puts a five-year cap on current worker pay that counts toward pensions.

San Jose Mayor Chuck Reed planned to put a measure on the November ballot capping city contributions to current worker pensions earned in the future. But he pushed the plan back to March, trying meanwhile to negotiate an optional plan with unions.

In San Francisco, Mayor Lee pushed negotiations with labor resulting in an alternative to Adachi’s initiative. Measure C has the same basic structure as Adachi‘s Measure D: higher worker contributions and lower pensions for new hires.

According to the city controller, Adachi’s Measure D would yield an estimated $400 million more in city cost reductions over the next 10 years than Measure C — $1.3 billion to $1.7 billion versus $1 billion to $1.3 billion.

Jeff Adachi at San Francisco State forum

Measure D would, among other things, authorize higher contributions from employees with higher salaries but does not, like Measure C, lower employee contributions when city contributions fall below current levels.

The triggers in Measure C that can lower employee contributions are the “offsetting reductions in good economic times” mentioned in the mayor’s ballot statement.

But if Measure C is approved by voters, some are skeptical about whether the potential for lower employee contributions in good times is enough to satisfy all of the factions and individuals that could mount a legal challenge.

Measure C has unusually broad support: all 11 members of the San Francisco board of supervisors, the San Francisco Chamber of Commerce and the San Francisco Labor Council.

A Bay Citizen/University of San Francisco poll released last week showed Measure C leading Measure D. A provision in Measure C would nullify Measure D even if voters approve both measures.

The poll showed Measure C with 45 percent support, 19 percent opposed and 36 percent undecided. Measure D had 36 percent support, 23 percent opposed and 41 percent undecided.

A San Francisco Chronicle editorial earlier this month endorsed Measure C, but gave a big tip of the hat to Adachi.

“Adachi deserves great credit for forcing City Hall to confront an inconvenient truth: It has been making grand promises to city workers for pensions and retiree health care without making provisions to pay for them,“ said the Chronicle. “His 2010 tough-love pension reform plan, Prop. B, while falling short, jolted the establishment into action.”

Ed Lee in campaign website photo

Adachi’s measure last year would have increased employee pension contributions and employee payments for dependent health care. A well-funded labor opposition campaign featured emotional ads about higher costs depriving persons of health care.

This year Adachi’s Measure D does not deal with rising health care costs. Measure C requires new and some recent employees to make small contributions toward retiree health care, saving the city an estimated $85 million over 10 years.

Adachi said last year he sponsored pension reform because soaring costs were cutting into funding for government services, including his public defender office that provides attorneys for the poor. This year he entered the crowded race for mayor.

“One of the reasons that I am running for mayor is because there are additional reforms that have to happen,” he said last week.

Lee was appointed interim mayor in January, replacing Gavin Newsom, the newly elected lieutenant governor. Some said Lee broke a promise not to run when he entered the race for mayor.

The new poll showed Lee with a lead, 36 percent, over the next candidate at 8 percent. Adachi was sixth at 5 percent. Former mayor Willie Brown warned that top vote-getters often lose in ranked-choice elections, which factor in second and third place votes.

The Chronicle editorial said Measures C and D “offer only modest down payments” on reforms needed to prevent pensions and retiree health care costs from “overwhelming the city’s ability to maintain basic services.”

If voters do not approve either of the measures, the editorial said, annual city pension obligations could be about $800 million by fiscal 2015-16, double the current payment from the general fund.

The newspaper endorsed Measure C because the agreement between labor and business leaders “sets the stage” for productive talks needed to address the retirement cost shortfall.

“Prop. D invites lawsuits by peeling back vested pension rights without offering new benefits in return,” said the Chronicle. “Case law seems pretty clear on this point: Vested rights can be revoked only in exchange for something of comparable value.”

Reporter Ed Mendel covered the Capitol in Sacramento for nearly three decades, most recently for the San Diego Union-Tribune. More stories are at https://calpensions.com/ Posted 24 Oct 11


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