San Francisco Unions Offer Worst Pension Reform Proposal Ever

The Bay Citizen reports today on a pension reform proposal that San Francisco's public employee unions are hoping to get on the ballot this November. Given that the city is still trying to close a $306 million budget gap and has an astounding $11.2 billion in unfunded pension liabilities, it clearly needs to find ways to grapple with this problem. Unfortunately, the unions' idea of "fixing the pension crisis" could cost the city hundreds of millions of additional dollars, and might not even be legal.

What the unions are suggesting is a change to the way in which San Francisco is required to fund its pensions; basically, they would make it possible for the city to pay in the immense sums it owes over 10 years instead of 5. In the short run, yes, this would save San Francisco about $30 million. In the long run, it would ultimately cost them a lot more, as fewer dollars going into the fund would mean lower investment returns. After that, it seems almost pedantic to point out that it's not technically legal to change the city charter in this way. It's just another reminder that San Francisco hasn't even begun to take its financial troubles seriously. Aside from the fact that the city can't afford to kick the can down the road at this point, papering over the problem with obvious accounting gimmicks would do even more damage to the city's standing with bond-ratings agencies. Considering that two issues of San Francisco's debt were downgraded by Fitch just last month, this is not an academic concern. At least not to anyone outside the city's organized labor or political machines.