Mayor Lee cites $4.4 billion unfunded retiree health liability, announces employee wellness leadership council

Mayor Edwin Lee told the Board of Supervisors that San Francisco faces a multibillion-dollar unfunded liability for retiree health care and outlined steps his administration has taken and will take to address rising employee health costs.

"This year we will spend $574,000,000 for the health care of our current employees, retirees, and their dependents," Lee said in question time with supervisors. He added that a city assessment in November 2012 estimated the unfunded retiree health obligation at $4,400,000,000.

Lee summarized prior policy changes and local ballot measures that have sought to address benefit costs and retiree funding. He cited a charter amendment passed in 2008 that altered eligibility and required employee contributions, and he said the Retiree Healthcare Trust Fund held about $20,500,000. Lee noted the city and labor worked on pension reforms and that earlier measures saved the city tens of millions of dollars.

To curb costs going forward, Lee said he has convened a wellness leadership council with representatives from city departments, labor and the controller's office. "We will develop a comprehensive strategic wellness plan to keep city employees healthy and healthcare costs down," he said, adding the council will include labor representatives and supervisors.

Why it matters: The retiree health liability is a long-term fiscal obligation that affects the city's budgeting and pension/benefit policy choices. Lee framed the wellness initiative as a preventive measure to reduce future spending and the growth of long-term liabilities.

Next steps: The mayor said the administration will work with labor and supervisors on the wellness council and long-term funding strategies for retiree health liabilities; no specific funding changes were proposed at the hearing.

Speakers quoted are drawn from the mayor's answers during the board's special order question time.