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Indybay FeatureRelated Categories: San Francisco | Labor & Workers
SF Union Tops, SFLC Back Reactionary Attack On Public Workers Pushed By Bosses
The leaders of IFPTE Local 21, SF Building Trades, and the leadership of the San Francisco Labor Council are backing a reactionary attack on public workers and retirees in San Francisco
Vote No on Proposition A: Protect Your Retiree Health Care Trust Fund
Future elected San Francisco officials may be inspired to force retirees and/or
their dependents onto to Medicare and/or purchasing insurance through
a state marketplace in order raid the Retiree Health Care Trust Fund to
cover other General Fund obligations if the below language in
Proposition A is interpreted to allow access to the Retiree Health
Care Trust Fund
at any time by eight votes of the Board of Supervisors and the Mayor:
(3) Upon a recommendation of the Controller, after consultation
with the City’s GASB Actuary, approval of the Mayor, and approval of
the Board of Supervisors by a two-thirds vote, the Board may adopt
disbursement limitations different from the limitations set forth in
Sections A8.432(d)(1) and A8.432(d)(2) above. The Mayor, the Board
of Supervisors and the Board may approve or reject, but not alter, the
Controller’s recommended changes to the disbursement limitations set
forth in Sections A8.432(d)(1) and A8.432(d)(2) above. Such recommended
changes must effectively balance the City’s goal of attaining
and maintaining a Fully Funded trust with the City’s overall financial
Vote NO on Proposition A to ensure the Retiree Health Care Trust Fund
cannot be be raided under in violation of long-standing Charter provisions!
This is a frightening national trend per the below news items . . . . .
Stockton could eliminate retiree health care for current workers and retirees
Retiree health | Calpensions
Stockton may dodge pension battle if deals hold
September 30, 2013
Chances of the Stockton bankruptcy producing a landmark ruling to cut
pensions dimmed last week, when the city announced a deal with one
bond insurer and a tentative deal with another one.
The two big bond insurers, who unsuccessfully opposed Stockton’s
eligibility for bankruptcy, argued that a city plan to cut bond debt
was unfair because the largest creditor, CalPERS, would be untouched.
U.S. Bankruptcy Judge Christopher Klein said the proper time to rule
on the CalPERS question is when the court considers whether all
creditors are being treated fairly by the city “plan of adjustment” to
cut debt and emerge from bankruptcy.
Now Stockton may be taking big steps toward resolving the fairness
issue by negotiating a plan with creditors to exit bankruptcy as urged
by the judge. Klein brought in another bankruptcy judge, Elizabeth
Perris, to conduct mediation.
A debt-cutting plan proposed by Stockton last week cited a tentative
agreement with National Public Finance Guarantee, backer of $89
million in bonds, and a draft agreement awaiting approval by Assured
Guarantee, backing $164 million in bonds.
The Stockton city manager, Bob Deis, said the city has agreements with
14 of 19 major creditors. He said a “cram down” approach, which
imposes debt cuts opposed by creditors, will not occur until a court
order is obtained.
Deis said the proposed plan of adjustment, scheduled for a City
Council vote Thursday, is the first step in a complicated process that
could, in six months, get Stockton out of the bankruptcy declared June
28 last year.
“While we expect further intense negotiations and court hearings, with
perhaps a set back here and there before this is over, this at least
is the beginning of the end,” Deis wrote in the plan. “It provides the
final piece in our road back to putting our financial house in order.”
One of the remaining hurdles is getting voter approval of a ¾-cent
sales tax on Nov. 5. The plan said the alternative to Measure A is $11
million in additional “brutal” spending cuts and the loss of
“negotiating room to cut deals with our creditors.”
How Stockton plan would close general fund spending gap
The Stockton bankruptcy has been widely watched because of speculation
that public pensions, protected against cuts by state court decisions
based on contract law, might be reduced in federal bankruptcy court
like other contract debt.
If the city negotiates agreements that avoid a ruling on whether
pensions can be cut, the Stockton bankruptcy still may have produced
an important ruling on a growing retirement cost: retiree health care
promised state and local government workers.
Retiree health care often has a long-term debt or “unfunded liability”
similar to pensions. But most employers do not make annual
pension-like contributions to a retiree health fund, which can yield
investment earnings to help pay future costs.
The view that retiree health care is a benefit that can be cut may
change. This month a superior court overturned a freeze on retiree
health care for Los Angeles city attorneys, citing the same contract
case law that protects public pensions.
The new Los Angeles ruling, though limited and likely to be appealed,
is already having an impact.
“Court ruling on retiree health benefits credit negative for Los
Angeles, could impact other California municipalities,” said a
headline in a Wall Street credit rating agency newsletter last week,
Moody’s Weekly Credit Outlook for Sept. 26.
If it turns out that state law does indeed give promised retiree
health care the same protection as pensions, a ruling in the Stockton
bankruptcy could be important as desperate cities look at the option
Judge Klein, in a deeply researched 40-page ruling last year, refused
to temporarily block Stockton’s elimination of retiree health care
while the city pursued eligibility for bankruptcy (granted in April)
and a debt-reduction plan to exit bankruptcy.
A Stockton retiree group argued that their promised retiree health
care is a vested right under federal and state contract law. Under
federal law, Klein said, a bankruptcy court cannot “interfere with”
the property or revenue of a debtor.
In other words, the bankruptcy court cannot tell the debtor how to
spend its money. So Klein said he could not block the cut that “may
lead to tragic hardships for individuals in the interval before their
claims are redressed” in a plan of adjustment.
The elimination of retiree health care for current workers and
retirees is one of the major savings in the proposed Stockton plan of
adjustment released last week.
“When I arrived in July, 2010, the unfunded actuarial accrued
liability (for retiree health care) was $544 million,” Deis wrote. “By
comparison, the actuarial value of unfunded liability for the
California Public Employees Retirement System (CalPERS) for June 30,
2011, was $172 million.”
Stockton has said since filing for bankruptcy that it does not want to
cut CalPERS debt, arguing that pensions must be protected to keep the
crime-ridden city competitive in the job marketplace, particularly for
Last June the city announced an agreement with a retiree group for a
$5.1 million retiree health care lump sum payment for an estimated
1,100 retiree claims, up from an original proposal that would have
given them nothing.
The proposed plan said Stockton has two groups of retirees, divided by
a big increase in benefits adopted by many local governments after a
CalPERS-sponsored bill, SB 400 in 1999, gave state workers a large,
trendsetting retroactive pension increase.
Workers who retired before Stockton gave employees a benefit increase
early last decade have an average pension of $24,000 and no retiree
health care. Since the increase, the average pension is $51,000 (most
get no Social Security) with a medical benefit worth $26,000 a year.
Stockton has negotiated agreements with all of its labor unions. The
plan estimated that the loss of retiree health care, pension reforms
and pay cuts reduces the total retirement benefit for current workers
by 30 percent to 50 percent or more.
Current employees will pay the full employee share of the contribution
to the California Public Employees Retirement System, 7 to 9 percent
of pay. New employees get a lower pension under a state reform.
If Stockton can cut a deal with the bond insurers, the judge may not
have to determine whether the bond insurers are treated unfairly
because the cuts for Stockton retirees are not deep enough.
A tough opening position by Stockton has softened in negotiations. The
new plan said that under a deal in February, Ambac, backer of $12
million in bonds, gets revenue from property tax growth and will not
get a “haircut” if assessed values grow as expected.
National Public gets revenue from property tax growth that should
“fully service” a restructured deal on $45 million in arena bonds. New
parking revenue is expected to cover a deal on $32 million in bonds
for three garages, repossessed by National Public.
The draft deal with Assured for $124 million in unsecured pension
bonds and $40 million in bonds for a city hall building, repossessed
by Assured, await approval by Assured executives and were not
Reporter Ed Mendel covered the Capitol in Sacramento for nearly three
decades, most recently for the San Diego Union-Tribune. More stories
are at Calpensions.com. Posted 30 Sep 13
IBM to transfer U.S. retirees to healthcare exchanges next year
Sat Sep 7, 2013 2:50pm EDT
(Reuters) - IBM plans to move U.S. retirees off its company-sponsored
health plan and shift them into new private insurance exchanges as a
way of lowering costs for retirees.
IBM had selected Extend Health, which is owned by Towers Watson & Co,
to provide retirees with new health options for medical, prescription
drug, dental and vision coverage, the company said in a statement on
The plan, it said, offered IBM retirees more choice and better value
than the company could provide through existing group plans.
IBM also said it was hosting meetings with groups of retirees across
the country to inform them about the move to the country's largest
private Medicare Exchange.
While some retirees may be skeptical, studies showed that the majority
of people have a more positive outlook once they were presented with
the concept and understood the options available to them through these
exchanges, IBM said.
Moving retirees to an exchange allows companies to reduce rising
health care costs.
"IBM didn't make this change to save money - it does not reduce our
costs," a spokesman said.
IBM to transfer U.S. retirees to healthcare exchanges next year
Projections indicate that healthcare costs under IBM's current plans
for Medicare-eligible retirees would triple by 2020, largely impacting
retiree premiums and out-of-pocket costs for retirees, he said. With
this move, he added, risks are spread across a much larger group in
the private marketplace.
According to the website Alliance@IBM, an employee group, the plan
will come into effect starting January 1, 2014.
IBM, the world's largest technology-services company, has been reining
in costs to ensure stable profits amid slowing demand for hardware.
At the end of last month most of its staff in its services and
technology group was asked to take a week furlough at one-third of
normal pay, according to Alliance@IBM.
The company took a $1 billion restructuring charge related to job cuts
in its second quarter.
The cuts were taken mainly outside of the United States, a spokesman
said at the time, adding about 60 percent were from IBM's services
division and 20 percent each from its hardware and software segments.
(The story corrects to say private. not public, exchanges and
clarifies cost savings is for retirees. Adds quote from IBM
(Reporting by Nicola Leske in New York; Editing by Lisa Shumaker)
U.S. Postal Service defaults on $5.6 billion payment for retiree health benefits
Postal Service defaults on $5.6 billion payment
By Aaron Smith @AaronSmithCNN October 1, 2013: 2:21 PM ET
NEW YORK (CNNMoney)
The U.S. Postal Service has defaulted on a $5.6 billion payment for
retiree health benefits that was due on Monday, just as the Postmaster
General had warned it would.
"We have not made the required $5.6 billion Retiree Health Benefits
prefunding payment due Sept. 30, 2013," wrote USPS spokeswomen
Patricia Licata in an email to CNNMoney. She added that the default
has absolutely nothing to do with the federal government shutdown. "We
have been saying for several months that we will be defaulting on this
payment. This is the third time we have [done so]," Licata wrote.
Postmaster General Patrick Donahue told the Senate Committee on
Homeland Security and Government Affairs that the default was going to
happen on Sept. 19.
At the time, he said the Postal Service was "in the midst of a
financial disaster" and that it is "burdened by an outdated and
inflexible business model" that prevents it from making payments.
Related: Postal Service seeks to hike stamp prices by 3 cents
Postal officials have long complained about a Congressional mandate
that requires them to set aside billions of dollars for a retiree
health care fund each year. The Postal Service also defaulted on these
prefund payments last year. In fiscal year 2012, the Postal Service
lost a total of $15.9 billion, including $11.1 billion in defaulted
payments that it owes to prefund health benefits for retirees.
But Postal officials point out that other federal agencies aren't
required to prefund for retirees this way.
In addtion, the Postal Service hit its debt limit last year, which
means that it cannot borrow any more money from the U.S. Treasury.
The Postal Service plans to cut 150,000 workers through 2015, and
recently proposed a price hike for stamps. But officials have said
that the crisis won't go away until Congress makes the prefund
Related: Cash-strapped USPS to rent mail vans
"The Postal Service continues to be in a financial crisis," said
Licata. "Without passage of comprehensive legislation as outlined in
our Five-Year Business Plan, current projections indicate that we will
have a dangerously low level of liquidity in the foreseeable future."
Unlike other federal agencies, the Postal Service isn't funded by
taxpayers, and is intended to function like a private business.
-- CNNMoney's Jennifer Liberto contributed to this story.
Yes On A Propaganda Attacking Public Workers With More Austerity
"Prop B in 2008 and Prop C in 2011 made significant progress toward fully funding the Retiree Healthcare Trust Fund (RHCTF) by requiring city employees to contribute more into the fund. However, the RHCTF is allowed to be drained in 2020, which would negate any effort to move to a fully-funded model, and ultimately reduce general fund annual contributions."
"By capping employer retiree healthcare expenses at 10% of payroll, the City will have greater certainty in its budgeting process."
• The Facts About Prop A
The Facts About Prop A
Proposition A Eliminates San Francisco’s $4.4 Billion Unfunded Retiree Health Care Liability
Today, San Francisco’s retiree health plan is funded on a pay-as-you-go basis, similar to Social Security at the federal level, where the current generation of taxpayers pays for the prior generation’s benefits.
Prop B in 2008 and Prop C in 2011 made significant progress toward fully funding the Retiree Healthcare Trust Fund (RHCTF) by requiring city employees to contribute more into the fund. However, the RHCTF is allowed to be drained in 2020, which would negate any effort to move to a fully-funded model, and ultimately reduce general fund annual contributions.
According to a report released by the City's Controller’s office, San Francisco’s current retiree health care costs are estimated to increase from $150 million in 2013, to more than $500 million in the next 20 years – an average annual increase of 8-9%, or nearly $13,487 per San Francisco household. These projections have also been confirmed by reports from organizations such as PEW.
If passed, Prop A will amend the City's Charter to create a legal lock-box for the RHCTF, and eliminate our City’s $4.4 billion liability in about 30 years. This will be without requiring increased contributions from current or retired City employees. Passing Prop A would make San Francisco voters the first city in the nation to address both pension reform and unfunded health liabilities.
Below is a graph representing the current projected costs for retiree health care expenses.
Proposition A Protects Retiree Health Care Benefits
Proposition A protects existing health care benefits earned by City retirees. It does not reduce those benefits and does not increase employee contributions. By capping employer retiree healthcare expenses at 10% of payroll, the City will have greater certainty in its budgeting process.
Proposition A Increases San Francisco’s Financial Security
Proposition A increases our City’s financial security and provides for more certain budgetary planning. A more stable financial future will encourage a more favorable bond rating, saving taxpayers money on voter-approved debt.
Proposition A Creates An Expert Panel to Oversee the Retiree Health Care Trust Fund
Proposition A establishes an expert panel to oversee the HCRTF composed of the Controller, Treasurer, Executive Director of the San Francisco Employee Retirement System, and one current and one former city employee appointed by our City’s Health Services System Board.
You can find out more information about Proposition A by clicking on these links:
• PEW Charitable Trusts - "Cities Squeezed by Pension and Retiree Health Care Shortfalls" - 3/8/13
• SFGate - "S.F. avoids retirees' health care issue" - 3/16/13
• SFGate - “Proposed ballot measure takes on retiree health care liability" - 5/21/13
• SF Examiner - "Retiree fund raiders eyed" - 6/5/13
• SF Examiner - "Planning for the next recession should begin now" - 6/30/13
• SF Chronicle - "Key vote coming on retiree health care liability"
• SFGate - "Voters to weigh in on retiree healthcare fund" - 7/16/13
• SF Examiner - "There is a way forward for City College" - 7/23/13
• UTSanDiego - “Detroit’s Lessons for California - and for City Schools” - 7/26/13
• SF Controllers Report
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Prop A Supporters
Mayor Ed Lee
Assessor Recorder Carmen Chu
District Attorney George Gascon
Supervisor John Avalos
Supervisor London Breed
Supervisor David Campos
Supervisor David Chiu
Supervisor Malia Cohen
Supervisor Mark Farrell
Supervisor Jane Kim
Supervisor Eric Mar
Supervisor Katy Tang
Supervisor Scott Wiener
Supervisor Norman Yee
BUSINESS AND LABOR
San Francisco Police Officers Association
San Francisco Firefighters Local 798
IFPTE Local 21
San Francisco Chamber of Commerce
San Francisco Council of District Merchants Association
Building Owners and Managers Association of San Francisco
Small Business Network
Coalition for Responsible Growth
Municipal Executives Association
Alliance for Jobs and Sustainable Growth
Committee on Jobs
UA Local 38
San Francisco Deputy Sheriff’s Association
San Francisco Veteran Police Officers Association
LiUNA! Laborers Local 261
San Francisco Democratic Party
San Francisco Republican Party
Alice B. Toklas LBGT Democratic Club
Harvey Milk LBGT Democratic Club
City Democratic Club
FDR Democratic Club
Protect Our Benefits
Retired Employees of the City and County of San Francisco
Raoul Wallenberg Jewish Democratic Club
Westside Chinese Democratic Club
Asian Pacific Democratic Club
Potrero Hill Democratic Club
District 3 Democratic Club
District 11 Democratic Club
San Francisco Young Democrats
Noe Valley Democratic Club
Chinese American Democratic Club
Bob Muscat, Executive Director of the IFPTE Local 21 and chair of the San Francisco Labor Council Public Employees Committee is working with the San Francisco Chamber of Commerce, Committee On Jobs and former investment banker Mark Farrell to push attacks on retirees and public workers