Proposition C - Pension Benefits for Misc. County and City Employees

Voter Guide
November 1, 2000
This measure appeared on the November 2000 San Francisco ballot.


What it does

This proposed charter amendment would create a new category of retirement benefits for most “miscellaneous” city employees (non-uniformed forces). During the 1970s, city workers had the “richest” benefits in the state, which were judged by the voters to be significant drain on the general fund. In 1976, a second retirement plan was adopted by the voters that reduced benefit levels for employees hired after that year. The original 1970s benefit plan is known as “Tier 1” and the revised, more modest plan “Tier 2.” Prop. C would create a third tier of retirement benefits, about half-way between Tier 1 and Tier 2 in cost to the taxpayers. The benefits for the three plans are set forth in the following table.

 
Tier 1
Tier 2
Tier 3
Calculation of pension benefits is partially based on age at retirement (percent per year of service at age 50 to percent per year of service at age 60 or above):
1 to 2 %
1 to 1.67%
1 to 2%
Calculation of pension benefits is partially based on average monthly salary earned during the employee’s highest pay period of:
One year (inclusive of overtime)
Three years (exclusive of overtime)
One year (exclusive of overtime)
Size of employee’s contributions (percentage of salary) currently paid by the city for most employees under previously approved MOUs:
8%
7.5%
7.5%
Maximum monthly pension payable as percentage of average monthly salary earned during highest pay period:
75%
70%
75%
Provision of pension benefits to the spouses of Employees’ Retirement System members who married after retirement:
Yes
No
No
Provision of pension benefits to the domestic partners of Employees’ Retirement System members who entered into domestic partnerships after retirement:
No
No
No
Retired employees working for the city over 960 hours per fiscal year:ProhibitedAllowed if pension payments suspended (reinstatement possible after cessation of working for the city)Allowed if pension payments suspended (reinstatement possible after cessation of working for the city)
Disability pension based on a percentage of final salary for each year of service (with a maximum cap if the member has less than 22.2 years of service at the point of disability and future years to age 60 were added to their service credit):
1.8% (40% cap)
1.5% (33.3 % cap)
1.8% (40 % cap)

 

Why it is on the ballot

It was placed on the ballot by the a unanimous vote of the Board of Supervisors, after negotiations with various employee unions.

Pros

Those who support this measure state:

  • The 1976 Amendment reduced pension benefits to the mid-range of those provided by PERS (the state retirement system) and other independently managed plans, such as the city of Los Angeles’ plan. San Francisco’s previous miscellaneous employee plan was clearly a “Cadillac Plan” that was draining a large part of the General fund during a very inflationary period. Today, San Francisco’s plan purportedly provides among the lowest benefits in the state. After January 2000, the PERS plan will provide benefits based on the “2% at 55” formula, using age factors to calculate benefits ranging from 1.1% at 50 to 2.5% at 65. This provides benefits at some retirement ages better than Proposition C but generally would place city retirees in the mid-range.
  • The city’s pension plan can afford to improve benefits for miscellaneous employees, as it has recently done for police and fire employees, to a similar level of other government plans.

Cons

Those who oppose this measure state:

  • Once again the voters are being asked to approve a benefit change in a vacuum. We are voting on a small percent of city employee benefits without knowing the whole package.

SPUR's analysis

At the time the Tier 2 plan was adopted, all the plans were seriously underfunded, costing the general fund $180-200 million a year. Today, as a result of previous contributions from the general fund and the strength of the economy, the plans are fully funded with an asset value of $13 billion (vs. a required minimum balance of $9 billion). The city is not expected to contribute to the retirement fund from the General fund again for at least 15 years. The major differences between Tier 2 and the proposed Tier 3 are: slightly increased monthly pension for those who retire at age 60; calculation is based on highest salary year, rather than average of highest 3 years; maximum pension can be 75% of highest year salary, rather than 70%; and the disability pension cap is increased. For a Tier 2 employee who retires at age 60 after 20 years of service with a final year salary of $50,000, the pension benefit will increase from $1,390 a month to $1,667 a month. The cost to the city will be approximately $34 million a year, beginning 15 or so years from now.

SPUR has consistently argued that the voters need to be given a complete accounting of compensation—including salary, vacation, benefits and work rules – in order to understand how city employees compare to other state and local government employees. SPUR has generally opposed or remained neutral on these measures because of the lack of information on total compensation. (SPUR did support parity for police in 1998 after an earlier improvement for firefighters was adopted.) After the November election, SPUR will take steps to offer the voters a charter amendment that will require an annual report of the total compensation package for all employee classifications. However in this case, we support Prop. C on its own merits, in order to bring such benefits up to a level similar to that of other state and local pension plans.

SPUR recommends a "Yes" vote on Prop. C.