Retiree Healthcare Costs: It's Even Worse Than You Think

Categories: Government, Health
San Francisco has recently received some dubious press for coming first on an unenviable list. A study by the group California Common Sense placed the City by the Bay atop its unfunded health care liability list.

San Francisco's workforce has amassed $4.36 billion in benefits the city is mandated to pay out -- and, naturally, the city has not yet begun to sock away dollar one for this looming deficit. Readers not scared out of their wits should yield the words of Yoda: You will be. You will be.

The California Common Sense report has initiated a brief flurry of media headlines and hand-wringing. But, in truth, this is a story nearly as old as Yoda. SF Weekly reported on the $4.36 billion liability back in 2010. We reported on it earlier when it was a mere $4 billion shortfall. Everyone in City Hall who can do math has known about this for a long time. What has the city done about it? Not nothing -- but not much, either. In fact, the $4.36 billion tally quoted in the report is already outdated. The city controller will release a newer, higher, more horrifying total in several months.

One of the major reasons that San Francisco's looming retiree healthcare bill is so high is that it has a small army of retirees on the books. For decades, all it took to receive lifetime healthcare in this city was five years on the payroll. When disgraced former San Francisco supervisor and California Secretary of State Kevin Shelley last year shuffled some papers for a month at the Public Utilities Commission, it qualified him to enter the city's retirement plan. Receiving a piddling $3,800 a year pension isn't much -- but lifetime healthcare for him and his spouse is a pretty sweet deal.

As the taxpayers of San Francisco would put it: You're welcome, Kevin. You're all welcome.

Proposition C of 2008 closed this loophole; new workers must now put in 20 years to receive vested healthcare. Employees hired after January of 2009 also put away a portion of their paychecks to fund their future healthcare costs. Finally, Prop. C of 2011 also required city workers to put aside some money into the Retiree Health Care Trust -- but a small, almost token amount that city officials told SF Weekly at the time was a sop to the bond-rating agencies that want some assurance San Francisco is doing something about the problem.

In the meantime, the unfunded healthcare liability continues to grow, because addressing it would require putting aside more than 15 percent of the city's payroll every year -- some $406 million in fiscal 2012-13 -- on top of the more than $1.15 billion the city spends on workers' benefits and the $2.64 billion it spends on salaries.

Or we could do nothing and leave the burden for the next generation. Sounds like a plan.

Supervisor Sean Elsbernd has introduced an ordinance that would require the controller to calculate the city's burgeoning unfunded healthcare liability every year, and include the number in the controller's budget revenue letter. "From my perspective that's not doing a hell of a lot, but it's giving the issue a little more attention," says Elsbernd, who's termed out in November. "Hopefully, if my colleagues are so kind to pass that ordinance, it'll put the ball on the tee for someone in the city to begin addressing the issue after I'm gone."

In this city, that counts as progress. Perhaps it'll be mentioned in the next study.

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There are individuals nearing retirement like myself, who are worried sick about leaving  this no good horrible mess for future generations.  First of all, we didn't create this burdensome pension system, and now due to increasing pressures are contributing 200% more toward our retirement, which isn't bad but the the individuals that created this mess, are living large at everyone's expense. 

If we ever want to see some of kind of equity, then we have to go back and deconstruct Proposition 13, which grandfathered-in the most incredible tax-breaks for corporations and  tax assessment protection for inherited property when passing from one generation to the next.

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