in Press Printer-friendly PDF file
Westside Observer Newspaper
March 2016 at www.WestsideObserver.com
Mayors Hiring Spree Unsustainable
Mayors Hiring Binge vs. Retiree Pensions
by Patrick Monette-Shaw
Once again, retired City employees are wrongly being blamed for Mayor Ed Lees looming budget deficit. The Mayor has quietly been on a hiring binge since taking office in January 2011, but seeks help from his media shills to obscure his budget failures by blaming City retirees.
This is completely twisted logic. Yet again, San Francisco Chronicle gossip columnists Matier and Ross have rushed to Lees rescue using yet more Chronicle spin control.
On December 7, 2015, Matier and Ross reported that nearly half of a projected $99 million deficit for Fiscal Year 20162017 starting July 1, 2016 can be chalked up to skyrocketing pension costs. But Matier and Ross noted that just $42 million is attributable to increased pension costs, which represents only 42.2% not nearly half of the projected deficit. While Matier and Ross railed against retirees, they neglected a basic duty of journalists to report facts fully, since they didnt bother reporting other causes of the remaining $57 million projected deficit, perhaps hoping readers wouldnt notice that something else may be out of whack contributing to the Mayors projected budget deficit.
While Matier and Ross noted the $99 million deficit for FY 1617, they failed to report that according to the City Controller, Mayor Lee appears to be facing a whopping $538.4 million deficit in FY 1920, just four-and-a-half years from now, that clearly isnt solely attributable to increased pension costs.
And of course, Matier and Ross mentioned not one word of an October 20, 2015 Chronicle article that reported Mayor Lees so-called Twitter Tax Break let mid-market technology firms avoid paying $34 million in taxes during FY 20132014, which was $30 million more than the $4 million Twitter Tax Break in FY 20122013, and which more than likely has grown even higher in FY 20142015 and the current FY 20152016.
Matier and Ross appear to prefer bashing City retirees, rather than bashing the tech companies cashing in on the lucrative Twitter Tax break that helps billionaires like Ron Conway, the Mayors chief campaign fundraising source.
Fast forward a month to January 5, when the San Francisco Examiner reported Mayor Lee has requested that City departments cut spending by 1.5% to cover the $100 million deficit for FY 20162017, and cut an additional 1.5% in their FY 20172018 budgets. The Mayors budget instructions claim that the two-year 3% budget cuts are necessary and are roughly equivalent to the citywide impact of the increased pension costs in each of the next two fiscal years.
For their part, Matier and Ross reported in December that pension payouts over the next four fiscal years (starting July 1, 2016) will increase by $113 million. It is thought $42 million of that can be attributed to increased pension costs in FY 20162017; the remaining $71 million increase reportedly occurs in the following three fiscal years between FY 1718 and FY 1920. Matier and Ross confounded the causes of the $113 million, implying that it was caused by retirees winning a lawsuit involving COLA payments, that retirees are living longer, and lower-than-expected pension fund investment returns.
Unfortunately, Matier and Ross may have misread a City Controllers report also dated December 7, that appears to indicate that of the $113 million pension increase during the next four fiscal years, only $35.9 million may be attributable to the three factors (decreased mortality, decreased investment returns, and COLA payments), and the remaining $77.1 million may involve increased pension costs that had already been identified previously.
For its part, the San Francisco Examiner rightly noted that there are other factors driving the budget deficit, including voter-adopted baselines and set-asides, along with projected increases in citywide operating costs, and other factors, which appeared to have been of no interest to Matier and Ross as they rushed to bash City retirees.
And stupidly, Matier and Ross turned a blind eye to the Mayors hiring binge, and baseline and set-aside budget increases.
Mayors Hell-Bent Hiring Binge
Mayor Lee initially took office at the half-way point during FY 20102011 when his tenure began on January 11, 2011. During the five years he has held office, he added 5,386 new of City employees across 41 City departments, according to the City Controllers fiscal year payroll databases, but offset that by eliminating 246 other City jobs across 11 other City departments. Of the 246 jobs eliminated, it saved Lees payroll-only budget just $4.8 million in just three City departments, at the same time that of the 246 jobs eliminated in the 11 affected City departments saw total pay increase by $48.7 million, for a net increase of $43 million, even among City departments who lost headcount.
The net change under Lees administration is he has added 5,139 full- and part-time employees to the Citys payroll at an increased cost of $567.1 million slightly over a half-billion dollars during just four-and-a-half short years. And thats not including fringe benefits and increased pension costs for the additional 5,139 City employees.
As Table 1 below illustrates, the 5,139 additional City employees represents a 15.1% increase in headcount and a 22.2% increase to the amount of the payroll during Lees tenure. What changed in City government requiring so many more City employees?
What more will Lee do to increase City Hall patronage hiring during his final four-year term, and at what cost?
We dont yet know how many more City employees Lee plans to hire in the current fiscal year, how many additional employees he may have already hired between July 1 and December 31, 2015, or how many he plans to hire between January 1 and June 30, 2016. But the number of new hires will likely go up, not down, despite his looming deficits. And of course the additional salaries in the payroll will come with added increases to pension benefits and fringe benefits.
Fattening the City Budget and Payroll
When Ed Lee became mayor, the Citys total budget as adopted was $6.56 billion. Within just four-and-a-half years, by FY 1415 the Citys total budget skyrocketed to $8.58 billion, a net change of $2.2 billion a staggering 30.8% increase.
Hidden away in the $2.2 billion total City budget increase was proof Lee has been on a hiring binge since taking office: The increase of $567.1 million in payroll costs, alone, represented almost 25% of the total City budget increase, which may prove to be unsustainable when the economic bubble bursts.
And while Matier and Ross whined about the $99 million budget deficit the Mayor is facing for FY 1617, the two men made no mention that the City Controller appears to be projecting a whopping $538.4 million shortfall (deficit) by FY 1920, driven in significant measure by the Mayors hiring spree in adding 5,139 employees (and counting) to the Citys payroll. The bubble may already be bursting.
Table 1: Summary of Mayor Lees Overall Hiring Binge
Its clear the Mayor has increased staffing by 15.1% and the Citys overall payroll by 22.7%, which Matier and Ross all but ignore when it comes to increasing City employer contributions to the Citys pension fund.
The attached report details specifics of increased employee headcounts in each of the Citys 52 departments
The City likes to claim a lower number of total City employees so as not to frighten the horses (otherwise known as taxpayers), but does so by combining multiple part-time employees into so-called Full-Time Equivalents (FTEs). For example, of the 33,983 City employees in FY 1011, aggregating part-time employees results in an approximation of just 26,670 FTEs.
Of the 39,122 City employees reported in the City Controllers payroll database for FY 1415 for the period ending June 30, 2015, that translates into the mythical approximation of just 30,414 FTEs, which, of course, is pure nonsense given that there were nearly 40,000 (39,122) warm bodies on the Citys payroll.
Unfortunately, it is not possible to easily research or calculate associated increases in fringe benefits included in Mayor Lees $2.2 billion City budget increase during this five fiscal-year period, because fringe benefit rates are tied to various union contracts and labor agreements, and specific job classification codes represented by each union.
Of the 5,139 City employee increase during Lees tenure, the vast majority of additional employees occurred in just seven of the Citys 52 departments. Nearly 83% 4,259 of 5,139 of the increased staffing, and almost two-thirds of the associated salary cost increases, occurred in just seven City departments as shown below in Table 2.
Table 2: Seven Largest City Departments as Beneficiaries of Mayor Lees Hiring Binge
A quick review of each of these seven City departments is instructive: (Note: Each of the following detailed reports compare percent changes within a given City department, rather than percent changes Citywide.)
Growth at the Department of Public Health
The attached report details job classification code changes between FY 1011 and FY 1415 for the Department of Public Health. Some observations include:
Growth at the Human Services Agency
The attached report details job classification code changes between FY 1011 and FY 1415 for San Franciscos Human Services Agency.
Growth at the Fire Department
The attached report details job classification code changes between FY 1011 and FY 1415 for the Department of Fire Department.
Growth at the Municipal Transportation Agency
The attached report details job classification code changes between FY 1011 and FY 1415 for MTA. SFMTAs budget increase of $75.65 million between FY 1011 and FY 1415 is worrisome.
At least 16.4% of the growth at MTA $12.45 million of its $75.65 million salary increase between FY 1011 and FY 1415 can be traced back to more public-relations, middle-management, transit planner, and senior management staffing increases, which obviously dont help Muni reach its on-time performance any better.
Growth at the Office of the Mayor
The attached report details job classification code changes between FY 1011 and FY 1415 for various branches within the Mayors office. While the Office of the Mayor wasnt actually among the Citys departments seeing major staffing increases across this period, increased staffing in Ed Lees various sub-offices is informative.
Growth at the Police Department
The attached report details job classification code changes between FY 1011 and FY 1415 in the Police Department.
Growth at the Recreation and Parks Department
The attached report details job classification code changes between FY 1011 and FY 1415 for Rec and Parks.
Screwing Part-Time Employees
During Mayor Lees tenure, the number of part-time City employees has soared. Of the 5,139 additional employees added to the payroll during his tenure, fully 42.5% of them 2,186 are part-time employees. Its a deliberate cost-savings maneuver on the Mayors part, including both salary savings and associated fringe benefit savings.
Table 3 below shows that 2,186 42.5% of the Mayors additional 5,139 hires to the payroll are part-time employees who worked less than 1,040 hours in FY 1415.
Table 3: The Surge in Part-Time Employees During Mayor Lees Tenure
The 9,692 part-time employees Citywide as of FY 1415 represent almost 25% of the all City employees; their average salaries were just over $16,000 annually.
By hiring more and more part-time employees, Ed Lee is shrewdly avoiding paying living wages and fringe benefits to City employees, screwing them in the process.
Table 4 below illustrates that of the 5,139 additional employees during Mayor Lees tenure, fully 3,972 77.3% were hired in just four City departments. Of those 3,972, fully 2,057 51.8% are part-time employees working less than 1,040 hours annually, and their average annual salaries range from a paltry $1,421 to just $2,563 for an entire year!
Table 4: Major Increases to Departmental Part-Time Employees FY 1011 and FY 1415
Table 4 also illustrates that of the total 20,520 employees in these four City departments almost one-third of them are part-time employees who worked less than 1,040 hours in FY 1415 and averaged very low annual salaries.
Table 5 below illustrates that fully 863 45.3% of the 1,907 additional employees in a select handful of City job classification codes between FY 1011 and FY 1415 were part-time employees. Of the 5,985 employees remaining in these 6 to 10 job classification codes in FY 1415, fully 3,377 56.4 % are part-time employees who earn, for the most part, paltry annual part-time salaries.
Table 5: Job Classification Code-Specific Increases to Part-Time Employees FY 1011 and FY 1415
Table 5 also illustrates that job classification 3210 that had combined Pool Lifeguards and Swimming Instructors in a single job classification code was split into two separate job classification codes (3208 and 3209), and that fully 100% of the 3208 and 3209 employees at the Recreation and Parks Department are all now part-time employees, making substantially less in part-time salaries than the 15 remaining employees in job classification code 3210.
Fringe Benefits Savings
The trend toward hiring ever-increasing part-time employees citywide is significant, in part, because City employees who work less than 20 hours a week (and dont rack up 1,040 hours annually on a rolling 12-month basis), are apparently not entitled to health care benefits, whether they are classified as permanent civil service (PCS), permanent exempt (PEX), temporary provisional (TPV), or temporary exempt (TEX) employees. And an unknown number of so called as-needed, intermittent, or seasonal employees receive no health care benefits at all whether or not they reach the 1,040-hour threshold unless they are a TEX employee after reaching the 1,040 hours in a rolling 12-month basis.
How part-time City employees do not receive health benefits until working 1,040 hours seems to fly in the face of San Franciscos Health Care Security Ordinance, which requires private-sector employers to provide healthcare benefits, irrespective of the number of hours worked. Why is there a carve-out allowing the City to not pay healthcare benefits to its 9,692 part-time employees working less than 1,040 hours annually? The answer, obviously, is to save the City a lot of money in fringe benefit costs!
Similarly, the City apparently may not contribute toward retirement benefits for employees working less than 20 hours a week, unless and until they work 1,040 hours in a rolling 12-month period, with the exception of Permanent Civil Service (PCS) employees who do receive the City contribution to retirement, while PEX, TPV, and TEX employees do not. It is not yet known, however, whether the PEX, TPV, and TEX employees are required to pay the employee contribution to the retirement system, even while probably not earning the employer-contributed share towards a pension.
Other Factors Driving Mayors Budget Deficit
While Matier and Ross whined about the $113 million increase in pension costs over the next four fiscal years (FY 1617 through FY 1920) that were largely of the Citys own fault, the pair of gossips raised not one word about the combined increase to the General Fund during the same four-year period in which there will be a minimum increase of $536.9 million for various baseline and set-aside programs and other citywide operating increases, including a staggering $118 million increase to support the Citys so-called non-profit partners, and a whopping $58.1 million increase in servicing the Citys debt load.
The data presented in Table 6 below is taken from a report the City Controller released on December 7, 2015, titled Five-Year Financial Plan Update for General Fund Supported Operations.
It is thought the City Controllers updated report only includes increases in changes to the Five-Year Plan since it was last calculated and presented a year ago, but probably not the entire dollar amount for each of the programs listed.
I say this, in part, because the line item for the Housing Trust Fund baseline reports there will be a $2.8 million increase to the Housing Trust Fund in each of the next four fiscal years, but doesnt report that voters in November 2012 approved starting the fund with an initial allocation of $20 million and adding $2.8 million each new fiscal year to the allocation made in the prior fiscal year.
For instance, the Housing Trust Funds (HTF) initial $20 million General Fund set-aside occurred in FY 1314. Two fiscal years later, the HTF set-aside had already reached $25.6 million by our current FY 1516. In reality, allocations to the HTF will increase to $28.4 million in FY 1617, $31.2 million in FY 1718, $34.0 million in FY 1819, and $36.8 million in FY 1920, illustrating data in the Controllers December 2015 report probably shows new changes to projections previously issued, not the actual allocations each baseline program will eventually be awarded.
Table 6 below shows that the Controller is now projecting additional increases to previous projections for various voter-adopted baselines and set-asides of $202.5 million, including a $77.1 million increase to MTA baselines and minimum wages and $49.8 million to the minimum wage baseline in the four fiscal years between FY 1617 and FY 1920.
Table 6 also shows a whopping $334.4 million to a variety of other citywide operating budget costs over the same four Fiscal Years, including $118 million increase for non-personnel costs and grants to the Citys non-profit partners, and an additional $58.1 million to cover increases to service various forms of debt funded by the General Fund.
Between the baselines and set-asides, and the increased citywide operating costs, the Controller is adding another $536.9 million to previously identified increases, which far exceeds the $113 million increase in pension costs.
Table 6: Looming Increases to General Fund Mandates
Why arent Matier and Ross at all concerned about servicing the Citys $18.1 million debt load, another $39.5 million increase to service debt on the Certificates of Participation, or the $202.5 million in voter-adopted baseline and set-aside increases, or the $334.4 million increase to other operating costs?
Are the pair cherry-picking what theyre going to whine about? After all, the $536.9 million increase to various baseline and set-aside increases, and other operating cost increases, are almost five times the size of the increased City pension costs.
The $536.9 million increase only includes the major programs in baselines and set-asides. An additional $15.3 million for increases to smaller programs may also be involved.
Readers are reminded that Table 6 probably only shows additional increases to these programs since previous projections issued a year ago, not the full allocations that may eventually be made.
Rise in the Citys $100,000+ Salary Fat Cat Club
Mayor Lee has clearly been on a hiring binge for City employees earning over $100,000 annually since assuming office.
Figure 1 below has been updated since I presented it in my October 2015 article, in part because I noted a discrepancy in the City Controllers FY 1011 payroll database the Controllers Office just recently acknowledged it had incorrectly provided to me had included payroll data for Superior Court employees who are not City employees; the City just administers issuing paychecks to Court employees.
Figure 1: The Growth in the Over 100K Club Keeps Climbing FY 1011 to FY 1415
Interestingly, Figure 1 illustrates that Mayor Lee added 3,126 employees earning over $100,000 to the Citys payroll between FY 1011 and FY 1415 at an increased cost of $509.9 million annually.
Why did the City need an additional 1,290 employees earning between $100,000 and $149,999 at an increased cost of $162.7 million? Why did the City need an additional 1,265 employees earning between $150,000 and $199,999 at an increased cost of $220.9 million? For that matter, why did the City need an additional 559 employees earning over $200,000 annually at an increased cost of $126.4 million? What did taxpayers gain from this bloat?
More troubling Table 7 below illustrates salary inequities that have dramatically worsened under Mayor Lee. The 3,126 additional City employees earning over $100,000 comprised 60.8% of the headcount increase, and fully 89.9% of the total $567.1 million salary amount increase. By contrast, the additional 2,013 employees added to the payroll accounted for almost 40% of the 5,139 employee increase, but were awarded just 10.1% of the $567.1 million salary amount increase. Hows that for the one-percent-ers (1%) getting richer while the 99% of us get poorer?
Table 7: Salary Inequities: FY 1011 to FY 1415
Salary inequities between those earning less than $100,000 annually and those earning over $100,000 annually has worsened. Table 7 illustrates there has been a 33.3% increase in the number of employees earning over $100,000 between FY 1011 and FY 1415, along with a 40.4% increase to the City payroll.
The average annual salary for those earning less than $100,000 dropped to $48,715 in FY 1415 while those earning over $100,000 had average salaries of almost $100,000 more, at $141,704. Can Mayor Lee spell i-n-e-q-u-i-t-y?
Table 7 also shows the inequities for those earning less than $50,000 annually. There was a 16.9% increase 1,754 of such employees between FY 1011 and FY 1415, but their average salaries plunged by $2,425 to just $17,336, a whopping 12.3% loss in average salaries for those making less than $50,000, even while the 33.3% increase in those earning over $100,000 saw their average salaries increase by $5.3%.
Table 8 and Table 9 below show the growth in City managers citywide and additional growth in Muni-specific managers between FY 1011 and FY 1415 who earned over $90,000 in base Regular Pay. [Note: The three Total Salaries columns show their combined Total Pay, which includes regular base pay, overtime, and various Other Pay.]
Table 8: Bloat in Citywide Senior Managers Earning Over $90,000 in Total Pay: FY 1011 to FY 1415
Between the citywide managers in Table 8 above and the Muni-specific managers and transit supervisors, in Table 9 on the next page, the City added an additional 190 managers, at an increased cost of $39.4 million fully 7% of Mayor Lees additional $567.1 million increase to the Citys budget. One reasonable question is: How have these additional 190 managers improved operations of City departments? Another reasonable question is whether the additional almost $40 million cost is justified. Does our City operate and function any better with this added bloat? Or is this just more political patronage and cronyism for employees who can comfortably afford to make political campaign contributions to the Mayor?
Table 9: Bloat in Senior MUNI Managers Earning Over $90,000 in Total Pay: FY 1011 to FY 1415
Citys Pension Contribution Share Inextricably Linked to Total Payroll
It is indisputable the City has made higher pension contributions between FY 1011 and FY 1415. The San Francisco Employees Retirement System (SFERS) just released its annual report for FY 20142015, which shows in FY 1011 the Citys employer share of retirement contributions totaled $308.8 million and rose to $592.6 million in FY 1415, for a net increase of $283 million across the four fiscal years.
The $283 million net increase in employer pension contributions more than likely had nothing to do with the three factors Matier and Ross whined about (increased life expectancy of retirees, the supplemental COLA payment, or lower investment returns), since the lower investment returns did not occur until FY 1415, the supplemental COLA lawsuit was only resolved towards the end of FY 1415, and City retirees had been having a lower mortality rate for a number of years that was simply not discovered and reported by SFERS actuarial consultants.
Instead, dollars to donuts suggest the $283 million increase to the Citys required employer share of pension contributions is more than likely attributable to the hiring binge Ed Lee has been on since taking office, which increased the Citys overall payroll by $567 million during his tenure, resulting in the increased total dollar amount of City contributions towards pension contributions.
You simply cant have a 15.1% increase in the number of City employees on the payroll, and a 22.7% increase to the Citys total payroll, without a concomitant increase in the amount of required City employer contributions. This isnt rocket science, its basic math, apparently lost on Matier and Ross.
Since the Citys share of employer contributions is based on a percentage of payroll, its obvious that if the percentage of employer contribution remains constant (or even increases), but is applied to a significantly larger payroll (say a payroll that has increased by $567 million), the total employer contribution is going to increase simply because the size of the payroll has increased. This has nothing to do with actuarial estimates of mortality vs. longevity, age at the time of hire, and length of time being a City employee.
As a partially hypothetical example, if the employer contribution rate is 10% and is applied to a year when San Franciscos payroll was $2.5 billion (San Franciscos actual payroll in FY 20102011), that suggests the City was on the hook to make $250.1 million in pension contributions as the employers share. But when San Franciscos actual payroll jumped to $3.1 billion in FY 20142015, when the same hypothetical 10% contribution rate is applied, the City may then have been on the hook to make $306.9 million as the employers pension contribution share, for a net increase of $56.7 million extra as the Citys share. [Note: The contribution rate in this example is hypothetical; payroll amounts are not.]
You would think this basic math would have been patently obvious to Matier and Ross. We just hope that their parents public-education or private-education investments between kindergarten and graduating from high school wasnt entirely wasted, and that they were just being math lazy, ignoring this exercise in basic math.
Another piece of this puzzle is that, obviously, the Citys total share of employer contributions is much lower for lower-paid City employees as compared to higher-paid employees. By eliminating many lower-paid City positions completely, and converting many other City positions to part-time positions to prevent having to pay retirement benefits at all, the City seeks to shift retirement contributions to its higher-paid employees, as sure as the Sun rises in the East, or the night follows the day. Another basic premise apparently lost on Matier and Ross.
This is due, in part, because there are many tiers within the pension system, each of which were approved by voters who amended the City Charter at the ballot box (like Proposition C in November 2011), in part based on which employee labor unions had backed the Charter changes. The Public Safety unions appear to have more tiers than non-public safety unions. And when employees who had been contributing at a given rate retire and are replaced by higher- or lower-paid employees, this also affects the Citys employer share of total pension contributions to the pension fund.
City Looses Lawsuit
In November 2011, the City placed a ballot measure before voters seeking, in part, to strip City employee retirees of supplemental COLA (Cost of Living) benefits, in part based on bad advice from City Attorney Dennis Herrera, who surely must have a team of labor-relations lawyers on his staff who should have known this gambit wasnt going to pass muster in a court of law. Its not the first time Herreras staff have provided bad advice to the Mayor, and then lost.
After voters wrongly approved restricting COLA payments to
retired City employees, a group called Protect Our Benefits (POB)
sued and eventually won in court, with the City ordered to pay
the withheld two supplemental COLA payments, along with interest
on the delayed payments.
Of approximately 26,000 retired City employees, the City has agreed so far to restore and pay approximately 17,000 former City employees the COLA benefit who retired after 1996. The City and the Retirement Board are still arguing over whether to extend the COLA back payments to another 7,800 to 8,315 employees who retired prior to 1996.
The upshot is that when the City lost the lawsuit it had to pay out $40.7 million wrongly withheld from post-1996 retirees, and SFERS did so from funds set aside during the lawsuit (including for the pre-1996 retirees) that had been placed into some sort of reserve account. So neither the City nor SFERS is out any funds from the Court ruling, since they had already been placed in some sort of a special reserve account.
This calls into question whether the City Controllers report claiming there will be a $42.3 million increase to pension benefits in FY 20162017 is simply the same $40.7 million already paid to post-1996 retirees, plus another $1.6 million for pre-1996 retirees still under negotiation that may not have been contained in a previous City Controller report, and is simply being double-counted as a new expense, when in fact it may have involved funds already held in reserve pending outcome of the lawsuit against the City, that the City may have been hoping to roll over into other pet-cause uses.
It wouldnt be the first time the City, or the City Controllers Office, has creatively cooked its books and cooked its numbers.
Youd think Matier and Ross would be on to this game by now, rather than racing to bash City retirees. Youd be wrong.
Indeed, in response to a records request asking the City Controllers Office to itemize the dollar amounts in each of the next four Fiscal Years for the three factors increased life expectancy of retirees, the supplemental COLA payment, or lower investment returns the City Controller has continued to stonewall, and hasnt provided the same data points for each Fiscal Year as it has for other baseline set-asides and other operating costs.
In truth, the COLA payments restored by the lawsuit against the City were retroactive supplemental COLA payments for FY 1213 and FY 1314 when the pension fund earned excess earnings. There will be no supplemental COLA payments for FY 1415 and likely not for FY 1516, given the loss of excess earnings. So any COLA increases in the Controllers projections are for standard COLA payments, but to a higher number of City employees who have since retired.
Table 10 illustrates that of the reported $113 million increase in City employer-required contributions by FT 1920 to the pension fund, the City Controllers Office has been unable or unwilling to stratify how much of the supposed $113 million increase is attributable to the three causes Matier and Ross had whined so bitterly about.
Table 10: Citys Employer Share of Pension Contribution Increases FY 1617 to FY 1920 (In Millions)
Row 5 in Table 10 above was inadequately described in the Controllers report, and may perhaps reflect increases to the Citys increased contributions to various tiers of police, fire, and miscellaneous benefit rates, perhaps separate and apart from issues listed in Rows 1 through 4.
Instead of providing tabular data showing the projected increases for each of the three factors in each of the next four Fiscal Years documenting the claimed $113 million increase in pension-related costs by FY 1920 as an example in Table 10 above shows, the Citys half-baked response only described (badly, possibly involving contradictions between explanations) the claimed $42 million increase for the first Fiscal Year, FY 1617. As it will probably turn out, none of the $42 million increase in FY 1617 may involve COLA increases, which reportedly do not come into play until FY 1718, shooting one hole in Matier and Ross foot.
The City Controllers staff eventually admitted that fully $14 million of the $42 million increase in the Citys employer pension contributions in FY 1617 33.3% of the total isnt attributable at all to the three factors Matier and Ross had complained about. Instead, the $14 million portion is attributable to increased pensionable pay from positions added when the FY 2016-17 budget was adopted in July 2015 meaning of course, that new employees Mayor Lee added to the budget have, indeed, driven up the employers required contribution to the pension system, as expected by basic math possibly lost on Matier and Ross.
Of interest, the City Controllers Office has so far refused to provide the additional costs of the Citys contributions for Ed Lees additional new hires for the following Fiscal Years leading up to FY 1920, perhaps wanting to obscure the data for political reasons.
Indeed, when the City Controller was pushed for further clarification, Controller Ben Rosenfields March 2 e-mail response claimed:
This is hilarious, precisely for the reason that the City Controllers Office right hand evidently doesnt know what its left hand is doing.
It seems to me to be intellectually dishonest or perhaps dishonest from an accounting or auditing basis for the Office of the Controller to have issued its December 7 Five-Year Financial Plan Update claiming a $113 million increase in the Citys required share of employer contributions to the pension fund by FY 1920, and then claim (as it did) that the Controllers Office doesnt have underlying data available or that was previously completed, and that, therefore, the Controllers Office doesnt have data responsive to this records request.
How could these trend lines have been created without the underlying data points (in dollars) clearly linked to the trend lines themselves?
How can the Controllers Office have asserted as fact a financial projection, and then claim it has no underlying detailed data to support the claimed projection?
On February 24, the Controllers Office claimed that of the $42 million in increased costs in just FY 1617 alone, fully $14 million (33%) is attributable not to the trend line graphs in Figures 1 on page 3 of this report, and in Figure A-2 on page 24, for the three factors, but to increased positions added after the FY 1617 budget was first adopted in July 2015 in the two-year budgeting process.
How the Controllers staff was able to identify that $14 million in FY 1617 may be attributable to new hires, but now cant project how those new hires have increased (in dollars) the contribution amounts for FY 1718 through FY 1920 also appears to be comical. How could they have found that first-year needle in a haystack, and then not be able to sift through the rest of the haystack?
A reasonable person would think that the Controllers Office would either rescind the entire December 7 report as unfounded, or at least issue a retraction that it cant find the data to have justified claiming a $113 million increase by FY 1920, in the absence of having that data in its hip pocket.
Of note, the City Controllers report failed to note that San Francisco's Employees Retirement System board of directors lowered the employer contribution rate to the Retirement Fund for FY 1617 down by 1.4% and also lowered active employee contributions down by 1%. The Controller didnt include those reduced rates and cost savings in his December report, which may significantly reduce the purported $42 million increase in FY 1617 and the $113 million increase by FY 1920..
The Mayors Own Estimated Pension
Ed Lee was first hired by the City on April 3, 1989, and has served continuously since then with no breaks in service. He has currently served for 27 years and by the time his tenure is up as Mayor at the end of December 2019, he will have served for 30 years. That earns you a lot in the way of a pension.
As it is, by the time Mayor Lee is termed out, he will have probably earned approximately $2.5 million in salary as the Mayor over an eight-and-a-half year period, given his yet unknown pay raises in FY 20152016 to FY 20182019 based on his FY 20142015 annual salary of $295,848.
Table 11 illustrates that if Mr. Lee were to retire and leave City government when he is termed out of office, he will become the highest-earning retiree among the past six mayors at a whopping $204,135 estimated annual pension.
Table 11: Historical Trends in Pensions of Former San Francisco Mayors
It may be unlikely, however that Lee will actually retire, because the Run, Ed, Run committee that sought to have him appointed as interim Mayor when Gavin Newsom stepped down had recommended a June 2011 ballot measure to amend San Franciscos City Charter to allow Lee to return to his former City Administrator job immediately after being termed out as mayor. The ballot measure was eventually withdrawn.
But it will not be too surprising if Mayor Lee approaches the Ethics Commission at the end of his term seeking a waiver to get around the one-year post-employment restriction so he can return immediately to his former job.
After all, the San Francisco Examiner reported on March 4, 2011:
Should Mayor Lee approach the Ethics Commission in 2019 seeking a waiver to get around the rule prohibiting the mayor or members of the Board of Supervisors from being appointed to full-time City employment for one year after leaving their elected positions, Ill attend an Ethics Commission hearing to oppose any such waiver being granted.
Scapegoating Retirees for Mayors Hiring Binge Is Intellectually Dishonest
In the end, the fact remains that rather than blaming City retirees for living longer and trying to assert that the COLA payments are the main cause of the Citys looming budget deficit, the real culprit may be that Mayor Lee has been on a patronage hiring binge, driving up the amount the City has to contribute as its employer share of pension contributions.
Blaming retirees for this is intellectually dishonest.
This is Ed Lees own doing, not the fault of City retirees
living longer, despite the misinformation Matier and Ross used
to whip up hysteria about increasing pension costs for City retirees,
while simultaneously ignoring massive spikes in baseline set-asides
and other operating cost increases totaling $536.9 million, plus
also ignoring the Mayors obvious $567.1 million hiring binge
that combined, totals over $1.1 billion,
which Matier and Ross didnt bother even mentioning.
Monette-Shaw is an open-government accountability advocate, a patient advocate, and a member of Californias First Amendment Coalition. He received a James Madison Freedom of Information Award from the Society of Professional Journalists-Northern California Chapter in 2012. He can be contacted at monette-shaw@westsideobserver.