Tuesday, May 10, 2011

Today's Reason Why San Francisco is Broke

Are you a government employee bummed out that you haven't worked long enough to qualify for a pension? (Well, if you are, you're probably not reading this blog, but bear with us here.) No worries, San Francisco's got you covered. Or, they do for the moment at least. The Chronicle reports today that we may have found a pension gimmick too outrageous for even San Francisco's government to tolerate. We know that sounds crazy, but when you've got an $11.2 billion unfunded pension liability, you have to get creative.

Here's how the gimmick works. Like city workers all across California, San Francisco employees contribute part of their paychecks (in this case, 7.5%) toward their pensions, and the city matches their contribution. Unlike city workers anywhere else, that 15% is used to calculate an annuity that these employees can draw on as soon as they turn 50. Also unlike city workers anywhere else, many San Francisco workers who pay nothing to a city pension (including elected officials, SIEU workers, and Muni drivers) can draw the same annuity equal to 15% of salary, with the city paying all of it. And these workers only have to give the city five years to qualify for the annuity, as opposed to the minimum of ten years' service required for a pension.

We know what you're thinking: it's hard to believe the city is broke with policies like this in place. To be fair, the annuity payments only totaled $3.3 million last year, and Mayor Ed Lee's plan to end them isn't going to save a pension system that's going to pay out $360 million in this year alone. But they say a lot about how San Francisco got itself into this mess.


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