A Plan To Save San Francisco $120 Million Per Year And Eliminate $3 Billion of Debt

To assist deficit-reduction deliberations, Govern For California commissioned an actuarial analysis of an alternative plan design for the City and County of San Francisco Postretirement Health Plan, which is an other postemployment benefit (“OPEB”) for retired city employees.

The alternative plan would reduce the city’s annual OPEB cash spending by $123 million and more in later years, eliminate $3.03 billion in liability, still provide the typical retiree with $2,500 per year of subsidy, and provide an opportunity to boost current employee pay by 1–2 percent.

At least two current members of the California Legislature are retired city employees entitled to OPEB benefits. Inasmuch as (i) San Francisco faces a large deficit that could be significantly reduced by this change, (ii) the city spends more on OPEB than on some programs, (iii) the current OPEB plan is extravagant* and (iv) the alternative plan would still provide retirees with a subsidy exceeding that available to their fellow citizens and retired employees in other states, we would hope and expect they would support this change.

Similar changes could eliminate more than $60 billion in OPEB liability at the state level of government and $500 million in liability at San Francisco’s school district, freeing up more money for services, students, teachers and other current employees. Changes to OPEB benefits have been made by other cities, school districts and states.

The analysis may be viewed here.

Govern For California supports lawmakers who serve the general interest.

*SF public safety employees (i.e., police and fire, who can retire at age 50 with a lifetime annual pension that can reach 90 percent of final compensation) and their surviving spouses and domestic partners receive subsidized postemployment medical, dental and vision insurance benefits even if the retiree takes another job or is eligible for premium support from the Affordable Care Act or Covered California’s new Middle Class Subsidies. Non-safety employees (who can retire at age 53 with an annual pension that can reach 75 percent of final compensation) are similarly subsidized. Cities such as Portland, Las Vegas and Phoenix provide nothing of the sort, as demonstrated by a massive difference in OPEB Liability Per Resident as shown below. The alternative plan would still provide San Francisco retirees with greater benefits than available in those other cities plus, unlike residents of those states, Californians are provided Middle Class Subsidies.

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Lecturer at Stanford University and president of Govern For California

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