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Eye on the News

Pete Peterson
Freakish Frisco
Where one-third of city workers make $100,000 and Willie Brown is a budget hawk
4 May 2010

San Francisco, a city accustomed to earthquakes, has recently been experiencing political tremors that may wind up reshaping its landscape. They started in January, when Willie Brown—the city’s former mayor, longtime speaker of the State Assembly, and now Democratic éminence grise—penned a startling mea culpa in the San Francisco Chronicle. “The deal used to be that civil servants were paid less than private sector workers in exchange for an understanding that they had job security for life,” Brown wrote. “But we politicians, pushed by our friends in labor, gradually expanded pay and benefits to private-sector levels while keeping the job protections and layering on incredibly generous retirement packages that pay ex-workers almost as much as current workers.” Brown’s essay was immediately picked up by Republican state legislators and conservative talk-radio hosts, who held it aloft, in an unusual demonstration of bipartisanship, to illustrate the causes of the state’s fiscal crisis.

Brown may have had in mind a 2009 report by the San Francisco Civil Grand Jury, which is charged by the San Francisco Superior Court with investigating local government. “Pensions Beyond Our Ability to Pay” disclosed that, for the 2011–12 fiscal year, the city would have to increase its contributions to its employees’ pensions by over 50 percent. San Francisco’s responsibilities for current retirees’ health care and pensions, the study added, were “like having a secondary police and fire department—one active member and one retired member.” And the current pension crisis pales compared with what the future holds as Baby Boomers retire—a demographic challenge to all public-sector institutions. In San Francisco’s case, half of the city’s workforce will be eligible for retirement in the next five years.

It happens that San Francisco is one of the few American cities where residents can vote on most municipal-employee pension decisions. So as refreshing as Brown’s castigation of “we politicians” was, San Franciscans themselves are also to blame for their current fiscal mess, which resulted from a series of ballot measures that they approved over the last several decades. “The San Francisco electorate is as guilty as the politicians for approving measures that push out obligations to pay retirement and health benefits into future years,” the Grand Jury report chastised. One reason for the voters’ bad decisions: the city’s electorate has an unusually high concentration of government employees.

While voters have had a say in San Francisco’s pension obligations, they’ve had little input into the shocking salaries paid to the city’s public servants. Last week, the San Francisco Chronicle reported on its front page that more than one in three members of the city’s workforce earned $100,000 or more in 2009. (To be clear: that figure does not include pension and health-care benefits.) At the top of San Francisco’s pay pyramid in 2009 was Charles Keohane, a deputy police chief who retired last year. Through redeeming sick days and unused vacation, Keohane managed to bring home $516,118—more than twice what Mayor Gavin Newsom (who placed 29th on the list) earned. The newspaper asked Keohane how it felt to take first place in the city’s salary sweepstakes. “Not so good, if it’s going to get my name in the paper,” Keohane replied candidly. Meanwhile, city workers in San Francisco make, on average, 20 percent more than private-sector employees, according to California’s Employment Development Department. All this while overall unemployment in California persists at 12.6 percent.

This year, San Francisco is running a deficit of nearly half a billion dollars. Getting out of the mess will require the active engagement of residents and elected officials alike. In April, Mayor Newsom negotiated for a 4.6 percent pay cut through forced furlough days for most city employees—a positive step, even coming from the same man who in 2007 accepted a 23 percent pay increase over four years for cops and firefighters. And in 2009, voters showed their readiness for fiscal sanity by passing Measure B, which requires new city workers to contribute 2 percent of their salaries (supported by a 1 percent match by the city) to a new retiree health-benefits fund.

The Civil Grand Jury study recommends another step: the development of a 401(k)-type retirement plan for new city employees to replace the current defined-benefit system. “By adopting a defined contribution plan, the mayor, board of supervisors and San Francisco Retirement System can do more to restore credibility to the public pension plans than any other action they can take,” the report said. It will be an uphill battle for the notoriously liberal, pro-labor City by the Bay. But as Newsom concludes his term this year by launching a bid for lieutenant governor of California, this would be the perfect issue for him to use to tack to the sane center.

Pete Peterson is executive director of Common Sense California, a multipartisan organization that supports citizen participation in policymaking (his views do not necessarily represent those of CSC). He also lectures on state and local governance at Pepperdine’s School of Public Policy.

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