Public Pensions Bankrupting San Francisco

The SF Weekly has published two long articles in the past year about how poorly run San Francisco is and how our elected officials have essentially mortgaged the city in order to provide generous pensions to public employees. If you are a San Francisco resident, these articles are essential reading. And even if you live elsewhere, you should still read them, or at least the one about the public pensions, because the financial problems we have here are sadly common in cities and states across the country.

Before I get to summarizing the articles, let me first state how unbelievably, pathetically lame it is that the San Francisco Chronicle, a big newspaper with lots of resources, didn’t produce either of these articles, getting scooped instead by a free weekly. Of course, the Chronicle is in such thrall to SF’s power structure that the only truth we should expect it to speak is that Mayor Newsom’s wife is pretty.

The first article, published last December, focuses on why nothing works in San Francisco. As the article notes, SF has a massive budget deficit, a bus system that can’t run on time and an ever-burgeoning homeless problem. “I have never heard anyone, even among liberals, say, ‘If only [our city] could be run like San Francisco,'” says urbanologist Joel Kotkin.”

The problem, according to SF Weekly: no accountability. Nobody in SF government ever loses their job, no matter how badly they perform. Committees are formed, ballot initiatives are offered, bonds are issued, but nothing ever gets done, and the same folks are kept in their administrative posts year after year. San Francisco’s deep liberalism comes into play here; any initiative that supports education, or the homeless, or other traditional liberal causes, becomes nearly sacrosanct. Criticism, or even investigation into effectiveness, is shrilly attacked. The city’s liberalism also gives unions tremendous power here, so any city department with union employees will likely have high wages and accountability issues.

Speaking of SF’s strong unions, SF Weekly’s second article, from just two weeks ago, is on exactly that topic. It discusses the massive growth of San Francisco pension and benefits obligations to its public employees. Retirement costs for city employees grew 66,733 percent over the last decade. Benefits this year (not salaries, just benefits) for current and retired city workers are budgeted for $993 million. That is in a city with only 815,000 citizens. This spending is projected to keep on growing, and the city has a $4 billion unfunded healthcare liability.

Why are these costs so high? As discussed above, general incompetence plays a role; you can’t expect mediocre managers to hold down costs. The city’s liberalism also factors in; voters continually approve ballot measures that improve benefits for city workers. A recent ballot proposition that would push some health care costs back onto city workers was soundly defeated. But a big chunk of the problem is structural, and here is where other cities are facing similar problems. Policies are set by politicians, politicians respond to money, and unions are very good at throwing their money around. Moreover, those policies are implemented by bureaucrats, who are also city employees, and who thus qualify for these same generous benefits.

Cities and states around the country are grappling with this problem, and the bottom line is that public employees are going to have to take a hit. They can’t keep earning as much as or more than private sector employees, have infinitely better benefits than private sector employees, and expect the gravy train to continue. As the Wall Street Journal noted recently, in Oakland the cost of just the police and fire departments make up 75% of the city budget.

Regular readers of Thoughtbasket are likely shocked to read a post that stands against unions, and that has me referencing the Journal in an approving way. Look, I support unions. My father and both my grandfathers were members of the IBEW. Union wages put a roof over my head as a kid, and union benefits paid for my medical expenses. But this is a time of austerity, and everybody has to tighten their belt. If public sector employees get to retire at 50 with 90% of their salary and gold-plated health benefits, then the rest of us are going to be working until we’re 90. Look at the chart below. San Francisco is paying 4 retired police officers a combined $1 million per year. Until they die. I’m sorry, but that is simply unsustainable.