Proposition A Eliminates San Francisco’s $4.4 Billion Unfunded Retiree Health Care Liability
Today, San Francisco’s retiree health plan is funded on a pay-as-you-go basis, similar to Social Security at the federal level, where the current generation of taxpayers pays for the prior generation’s benefits.
Prop B in 2008 and Prop C in 2011 made significant progress toward fully funding the Retiree Healthcare Trust Fund (RHCTF) by requiring city employees to contribute more into the fund. However, the RHCTF is allowed to be drained in 2020, which would negate any effort to move to a fully-funded model, and ultimately reduce general fund annual contributions.
According to a report released by the City's Controller’s office, San Francisco’s current retiree health care costs are estimated to increase from $150 million in 2013, to more than $500 million in the next 20 years – an average annual increase of 8-9%, or nearly $13,487 per San Francisco household. These projections have also been confirmed by reports from organizations such as PEW.
If passed, Prop A will amend the City's Charter to create a legal lock-box for the RHCTF, and eliminate our City’s $4.4 billion liability in about 30 years. This will be without requiring increased contributions from current or retired City employees. Passing Prop A would make San Francisco voters the first city in the nation to address both pension reform and unfunded health liabilities.
Below is a graph representing the current projected costs for retiree health care expenses.
Proposition A Protects Retiree Health Care Benefits
Proposition A protects existing health care benefits earned by City retirees. It does not reduce those benefits and does not increase employee contributions. By capping employer retiree healthcare expenses at 10% of payroll, the City will have greater certainty in its budgeting process.
Proposition A Increases San Francisco’s Financial Security
Proposition A increases our City’s financial security and provides for more certain budgetary planning. A more stable financial future will encourage a more favorable bond rating, saving taxpayers money on voter-approved debt.
Proposition A Creates An Expert Panel to Oversee the Retiree Health Care Trust Fund
Proposition A establishes an expert panel to oversee the HCRTF composed of the Controller, Treasurer, Executive Director of the San Francisco Employee Retirement System, and one current and one former city employee appointed by our City’s Health Services System Board.
You can find out more information about Proposition A by clicking on these links:
- PEW Charitable Trusts - "Cities Squeezed by Pension and Retiree Health Care Shortfalls" - 3/8/13
- SFGate - "S.F. avoids retirees' health care issue" - 3/16/13
- SFGate - “Proposed ballot measure takes on retiree health care liability" - 5/21/13
- SF Examiner - "Retiree fund raiders eyed" - 6/5/13
- SF Examiner - "Planning for the next recession should begin now" - 6/30/13
- SF Chronicle - "Key vote coming on retiree health care liability"
- SFGate - "Voters to weigh in on retiree healthcare fund" - 7/16/13
- SF Examiner - "There is a way forward for City College" - 7/23/13
- UTSanDiego - “Detroit’s Lessons for California - and for City Schools” - 7/26/13
- SF Controllers Report
- San Francisco Bay Guardian - "Endorsements 2013" - 10/1/13
- San Francisco Chronicle - "Vote Yes on S.F.'s Proposition A " - 10/2/13