This is Part I of a three-part series on San Francisco retirement benefits. In the first installment, we will examine “The Good”: the San Francisco Employees’ Retirement System.
By “good” I certainly don’t mean “perfect” or even “un-scary,” but I do mean that our system is the envy of other localities. And compared to our retiree health benefits fund (the subject of Part II) the city pension fund is positively fat and happy. Some background:
* SFERS provides a “defined benefit,” meaning that when a city employee with at least 10 years of service retires, he or she is guaranteed a certain amount of money each month for life. The amount is based on age at retirement, length of service and final compensation from The City.
*Participants contribute 7.5 percent of their wages to SFERS. The fund itself also (ideally) makes money on investments. To the extent that these two sources aren’t enough to meet plan obligations, the San Francisco general fund must fill that gap.
* For fiscal year 2010-11, The City’s obligation is about $325 million. By 2013, that number is projected to be more than $600 million. (Now would be a good time to breathe into a brown paper bag.)
* Schadenfreude is cold comfort...but in case you’re interested, San Diego’s pension fund is $2.1 billion short of its obligations and Los Angeles needs $4.6 billion to be fully funded.
Earlier this month, former SFERS Executive Director Clare Murphy graciously agreed to talk to me about the state of San Francisco’s pension fund. Here’s what she had to say:
How are we doing?
We are vigilant as ever with regard to managing the trust’s assets of some $13.5 billion. Despite some recent losses, our pension plan is strongly funded.
Why are we in better shape than other cities?
There are two primary reasons for the strength of our fund. First, in San Francisco, changes to retirement benefits have to be approved by voters. Any proposed increase is made very public, and the financial impact is calculated for all to see. Because voters have a long view of city finances, few such proposals are passed. This keeps fund obligations at a moderate level. San Diego and Orange County are looking to copy our system.
Second, the retirement board — which oversees the fund — is made up of well-qualified and focused trustees who are committed to thoughtful and responsible investment.
Still, things look pretty grim. How scared should we be?
Pension funds have long tails. You can’t isolate this year or even this decade and say, “The sky is falling.” When we look at the fund, we have to project 40 to 80 years in the future; there are going to be some volatile years. Last year, the employer contribution was the equivalent of 9.5 percent of the total city payroll. This year, it will be 13.5 percent. But back in the ’80s, there were times when it was more than 100 percent for safety personnel and almost 20 percent for miscellaneous employees. The fund was established in 1889. It survived the Great Depression and it’ll survive the current crisis.
After 24 years as executive director of SFERS, you’re retiring and only have two days left on the job. Can I get you to say something dicey about your time here? Got any gossip? A list of people you hate?
(Laughs.) I still have a continuing responsibility to the people of The City and county of San Francisco.
Eh, it was worth a shot.
Information for this post is from a recently-released actuarial report, which is attached here as a huge pdf. Download SFERS 2009 Report
Dearest Sweetie Melissa Griffin from Georgia who made a road trip to Patagonia on a Segway,
You jaw-droppingly brilliant mind is inspiring! Forget the Examiner -- you should be writing for fancy-pancy scholarly journals and professing somewhere.
Posted by: Matt Stewart | January 28, 2010 at 14:10
this is very helpful and informative. thank you for doing the work to explain this so we can make good decisions in the future as voters.
Posted by: njudah | January 28, 2010 at 14:32