Supervisors advance charter amendment to prefund San Francisco retiree health trust

Supervisor Norman Yee, chair of the Budget and Finance Committee, and Supervisor Scott Wiener’s colleague introduced and advanced a charter amendment aimed at prefunding the City and County of San Francisco’s Retiree Health Care Trust Fund.

Supervisor Farrell told the committee the measure is designed to address the city’s approximately $4.4 billion unfunded other post-employment benefits (OPEB) liability. "With this Charter Amendment, we will reduce and eliminate our $4,400,000,000 unfunded retiree healthcare liability without asking employees for any additional concessions at all and without reducing any benefits," Farrell said during his presentation.

The amendment contains three principal elements: it restricts withdrawals from the trust until the fund is fully funded, it creates a narrow exception allowing withdrawals in years when an employer’s retiree health-care costs exceed 10% of payroll (Farrell said the city’s contribution is currently about 6%), and it allows limited modifications to funding guidelines if recommended by the controller and the city’s actuary and approved by the mayor, two-thirds of the Board of Supervisors and the Retiree Healthcare Trust Fund Board.

Farrell argued prefunding will generate investment income to offset future benefit costs and improve long-term fiscal stability and credit ratings. He said, "the switch to a prefunded system provides more balanced generational equity" and estimated the proposal would eliminate the current OPEB liability in roughly three decades.

Labor and retiree groups that spoke during public comment generally supported the measure. Bob Muscat, representing the Public Employee Committee and Local 21, said the proposal’s focus on financial discipline was preferable to asking employees for more contributions. Larry Barsetti, chair of Protect Our Benefits, said he had been skeptical initially but now supported the charter amendment. Business groups also voiced support: Jim Lazarus of the San Francisco Chamber of Commerce said the measure will help avoid insolvency risks and reduce future borrowing costs.

Not all public commenters were in favor. Kaye Walker, a retired social worker and member of Protect Our Benefits, said she was "not supportive" of the amendment as drafted and asked for more actuarial detail and clarity about the funding mechanisms. Sharon Johnston, a retiree and former Health Services Board member, asked for analyses detailing what would happen if other employers such as the Unified School District or the Superior Court choose not to opt in.

Controller Ben Rosenfield told the committee there is no deadline for other governmental employers to opt into the trust; the community college district had recently opted in and the school district had not. Rosenfield said the amendment requires any employer that opts in to adopt a disbursement policy by a two-thirds vote of its governing board before any withdrawals could occur.

Committee members moved to adopt an "amendment of the whole" to the charter proposal; the motion was seconded and passed by voice. The committee then voted to continue the item, as amended, to the Special Rules Committee on June 27 for further consideration.

The committee provided supporters and critics an opportunity to seek follow-up materials from the controller and the budget office; Farrell said staff would provide charts and modeling that had been shared with labor and stakeholders. The item will return to committee after the Special Rules Committee hearing.