Controller: Labor-Backed Pension 'Reform' Would Cost City $13.2M Per Year

Look! "Reform"!

​We've reported a bit on Supervisor Sean Elsbernd's attempts to save the city a modest bundle via pension reform, and the SEIU's attempts to amend the plan via Supervisor Eric Mar.

While Mar claimed his amendments wouldn't cost the city any additional money, Elsbernd disagreed -- and, now the city's number-crunchers can quantify why. Peg Stevenson, director of the city's performance group, has calculated that the labor-crafted Mar amendments would cost the city $13.2 million annually. Since the point of "pension reform" is to save money -- and not spend more -- this is a somewhat incredible development.

Here's why the Mar amendment would cost the city millions:

With the exception of a few minuscule unions, the SEIU is the only city union that doesn't pay into its own pension plan; the city has in the past agreed to do it for them in lieu of raises. The SEIU -- via Mar -- is now offering to make a trade: The union members will pay the 7.5 percent pension costs in exchange for a 7 percent pay raise. This, Mar said earlier this month during a Rules Committee meeting, was a cost-neutral exchange.

Stevenson's calculations, however, reveal it's not nearly so simple. The dollars San Francisco pays into SEIU workers' pensions are untaxed; 100 percent of those payments go just where they should. Yet money paid out in salary costs is different: The city would now be on the hook for drains such as Social Security, Unemployment, and Long-Term Disability.

When you do the math, Stevenson says, the city must spend $1.16 for every dollar it pays toward workers' salaries. Ay, there's the rub.

It also stands to reason that if you give city workers raises, they'll eventually be eligible for higher pensions. Stevenson said she isn't yet able to calculate those costs -- but doesn't think it'll change her numbers "by any order of magnitude."

The full Board of Supervisors debates both Elsbernd's original plan and Mar's "labor-friendly" amendments on the 23rd. It will be interesting to see how that discussion pans out -- and if the concept of pension "reform" costing the city millions in even the short-term is as ludicrous to our elected officials as it is to the rest of the civilized world.