Grand jury warns of "pension tsunami" as supervisors hear department rebuttals; committee forwards resolution to full board

The Government Audit & Oversight Committee of the San Francisco Board of Supervisors on [date not specified] heard a civil grand jury report titled "Pension Tsunami, the Billion Dollar Bubble," listened to department responses and public comment, and directed staff to incorporate testimony into a Board response and forward a resolution to the full Board.

Leslie Couch, foreperson of the 02/2010 San Francisco Civil Grand Jury, introduced the report and Craig Weber, chair of the grand jury committee, said the panel's investigation identified growing pension and retiree health liabilities and summarized the report's "10 inconvenient truths." "Please obtain the report and read it," Weber told the committee.

Department representatives framed the financial picture differently. Gary Amelio and retirement-system staff said the San Francisco retirement plan is actuarially funded (approximately 97%) and is ‘‘one of the better funded and best managed retirement systems in the country.'' Greg Wagner of the Mayor's Budget Office acknowledged growing pension and other benefit costs but pointed to recent voter-approved reforms (Proposition B and Proposition D) and said the city has taken steps to prefund liabilities.

Officials and actuaries debated assumptions underlying the grand jury's projections. The civil grand jury highlighted a scenario in which employer contribution rates could reach 30 percent in coming years under low-return assumptions; retirement officials and actuaries said that figure represents an illustrative worst-case corridor based on a 4.5 percent return assumption, not a forecast the board has adopted. The retirement system said it uses a central assumption of 7.75 percent in budget projections and that actual returns and demographic experience can materially change employer contribution paths.

Controller's Office staff and the Mayor's Budget Office acknowledged that pension and OPEB (other post-employment benefits) costs are growing and constrain future budgets. Peg Stevenson of the Controller's Office said the city has pursued reporting and prefunding steps and that long-term projections are planning tools that must be addressed through policy choices.

Public comment included a forceful warning from former public defender Jeff Adachi, who, speaking as a private citizen, said the city is already spending roughly "$829,000,000 this year" on retiree pensions and health and claimed a $4,000,000,000 unfunded retiree health liability. Other members of the public and grand jury representatives urged reforms to reduce aggressive final-pay practices and to consider measures such as a three-year final-pay average and limits on pensionable earnings.

After department responses and public comment, the committee instructed staff (without recorded objection) to incorporate the testimony into the Board of Supervisors' draft responses to the grand jury findings. Supervisor Carmen Chu moved to file item No. 1 (the hearing) and to send item No. 2 (the draft resolution responding to the presiding judge) forward with the incorporated changes; the committee adopted that motion without objection and adjourned.

The committee did not vote on specific pension policy changes at the hearing; it directed staff to draft a Board response that will be considered by the full Board of Supervisors.