A decade ago the San Francisco public pension system was known for being well-funded, winning good management awards, and going eight years with no annual payments from the city.
The distinctive feature of the San Francisco system — requiring voter approval of pension increases — was approved by voters for the San Diego pension system in 2006 and the Orange County pension system in 2008.
Last month, a Civil Grand Jury report concluded that most of the debt of the San Francisco Employees Retirement System, which has been underfunded for more than a decade, was approved by the voters who in theory are a safeguard.
“There are several causes for the underfunding of the Retirement System, but the main underlying cause is the retroactive retirement benefit increases implemented by voter-approved propositions between 1996 and 2008,” said the report.
“These retroactive increases were very expensive gifts to employees and retirees from taxpayers, paid for with money borrowed at a high interest rate from the Retirement System, and paid back over 20 years by taxpayers.”
The grand jury suggests voters may have been misled by official ballot pamphlet cost information on two of the three “significant” pension increases described in the report. A dozen retroactive retirement benefit increases between 1996 and 2008 are listed in a report appendix.
Voters were told that even with a retroactive pension increase for most employees (Proposition C in 2000) the city is not expected to make an annual payment to the retirement system “for at least the next 15 years.”
The eight-year period with no annual city payment to the retirement system, known as a “contribution holiday,” ended in 2004.
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