you. let s keep moving through the recommendations. supervisor chu: just a quick thing, are there any other departments that want to respond to recommendation b1? for the controller s office, this subject matter was in last year s report and there was a fair amount more detail on where we think the city s controls are in this areañr. it is true that this practice, if exists, which we don t think is a major issue here, but it is long and costly, and there is no underlying this agreement with the concept that is represented here. although we are not offering it auditing this specific issue, we have a zero audit program will be solid job classis, the departments, or functions on a regular basis and look at the appropriate payment in terms of premiums, whether or not they re being treated correctly by way of pay code, correctly included with pension compensation, that kind of thing. we have an audit program that addresses appropriate treatment of pay in that way. supervisor mar: thank you. are there any other departments that want to respond? ok. does anyone want to respond to any of the other recommendations made by the civil grand jury? we are all the way to f1 and f2 now. seeing none, and of colleagues don t have any other questions or points, let s open this up to public comment. we have our public defender, jeff, with us. thank you very much, supervisors. i am here as a private citizen, not just a public defender. if i was watching this on tv, i would either be confused or think there is no problem at all and everything was fine. there are two interpretations. you have the grand jury that studied this issue over two years and has indicated that our city is in huge trouble, describing it as a tsunami, or you have the presentation that you just heard the saying that we re doing everything we can and everything is fine. you have two very opposite conclusions that have been drawn here. which is it true? i can say that i have met with the controller s office again. the numbers are not five years from now but right now. how much are we spending on retirees pensions and health benefits for city employees? we are spending approximatelyçó$ 829 million. the city comptroller, whose opinion i trust because it is his job to provide independent analysis, says this number will go up by double in the next five years. double. it will be spending twice as much. by that time, about one-third of the money and resources that we have in the city is going to be going to pay benefits for city employees. that is not including salaries. that is just benefits. we know that five years ago, san francisco was paying $175 million per year in retirees pensions and health insurance premiums. we know that this year is close to $500 million. that does not include the health care costs for city employees, which according to the controller of this year is $456 million. that, of course, does not include and there is no there is a deficit of $4 billion of unfunded liability. we have made $4 billion of promises to city employees to cover their health care that we cannot pay for. the equivalent is like having a credit card, boeing tend thousand dollars, spending another $5,000, owing $10,000, spending another $5,000, and making the minimum payment. that is why the unfunded liability is growing. that is a problem. is that a tsunami, or is that, hey, don t worry about it, kick the can down the road? we know that is already happening. we are spending 28 times more pension and health-care costs on city employees than we are fixing streets. it would canceled summer school this year for 10 dousing kids because we did not have $4 million we canceled summer school this year for 10 dozen kids because we did not have the $4 million to fund the program. for tend thousand kids. this demands a solution and it requires it. thank you. supervisor mar: public defender, what is your solution? proposition b, that all city employees should contribute to their pensions. as of today, 11,000 people do. under prop b, all city employees would pay 9% or 10%. but also require them to share more of the costs of health care. supervisor mar: thank you so much. thank you. supervisor mar: i only have one car from a speaker, but others come forward if you would like to speak. richard roth men? richard rothman? first, thank you for changing the day of the meeting. i appreciate that. i just want to say that i am paid for the grand jury report. they talk about the average city worker, and they did not want to report to presume the average city worker is making a large pension and works hard and gets an average pension. the average pension, i got these figures from the retirement board, the average pension including police, fire and miscellaneous per year is just over $33,000. the average pension for miscellaneous workers, excluding police and fire is $25,000. why didn t the penchant why didn t the grand jury talk about the average city worker? also talking about proposition b, in 2008, which i helped negotiate, they completely left out one of the most important reports, that we change the five-year vesting for health benefits. now to get full health benefits, one has to work 20 years and also one has to get the benefits with i believe is within 180 days. from the past, people could come from one department, worked five years, and ms. callahan said it would only have to work six months and go back to another job, especially state employees. we changed this. the unions recognize there is a problem, and we have been working on this problem. i just think that the grand jury needed to present all of the facts about what is going on and it needs to mention what the average city retiree, employee receives. thank you. supervisor mar: thank you, mr. rothman. walter, please come forward. it seems like we are working in the city until the sun don t shine until i want some pension behind and bring it on backe i hope the pension comes back someday come what may, i am city blue by you we work and work kind and we will stand by you. and the fishing with their sales afloat we would like our pension act that familiar money could you bring it back, please? supervisor mar: thank you. mr. denny? thank you for the opportunity to speak here today. i am a small business owner with 16 employees. i provide health care and i don t get a dime of public money. despite that, our firm generates over $200,000 in various taxes to various agencies, yet for all this, i earn a salary of $80,000 with no pension and no savings. everything that i have is in my business, and yet, despite my contribution to government, i live hand to mouth. in this way, i am like most san francisco citizens and taxpayers. you all must know how incredibly opulent these compensation packages appear to the average san franciscan taxpayer and citizen. i applaud prop b and only criticize it does not go nearly far enough, and i urge you to please consider those people who are out there paying for these bills and avoid for yourselves the appearance of telling us all, let them eat cake. thank you. supervisor mar: thank you. miss shirley henson? i know that retirement contacts cannot be changed. they are fixed in stone. but increasing costs must either be paid by new taxes and fees, by abolishing city jobs, abolishing city services, or the tooth fairy. or by raising employee contributions. and the costs to keep the well- intended promises will impact the basic city services and erode the quality of life for our youth, the port, the disabled and the elderly, and all citizens who have no union or lobby to represent their interests. and i know that the union officials bargained in good faith during prosperous times and then shared the largess by making generous pension and health-care promises to the employees, and the voter seconded with the unions and officials started. but the taxpayers can no longer afford these generous benefits. and so i urge you to do something about it. supervisor mar: thank you. i want to thank mr. weber and the two years of war for not just this report and for the two years of not just working on this report but the hard work of the civil grand jury. mr. weber? i just want to make a short comment. when supervisor chu referred to the return on the pension fund, with the city s contribution rate will be in five years, there was some discussion of whether it is 30%, 27%, 26%. at one of the assumptions that the san francisco retirement system has made, or the actuarial firm that did the stress tests on the pension fund, was 7.75% return. it is my understanding from the actuary at the return on the fund over the last 10 years, on average, is only 4.5%. that is nowhere near 7.75%. the blackstone group, which is an international money management firm, has given testimony to calpers, and they basically said the% assumption that calpers has used an editorial evaluation is way off the mark and basically said the 8% assumption is way off the mark. san francisco reduced their return assumption to 7.75% two years ago. the fact that the history does not really show returns of that amount is significant and was not discussed here. the other point i want to make is just the cost of pensions. we did not talk all about the appendix in the report which shows the actual pensions ever paid. there was no discussion about the $100,000 club. 900 retired city workers make pensions in excess of $100,000. one out of every four firefighters who retires from san francisco is getting a pension of $100,000 or more. the fire department and police officers retired life behind fire. there is always this assumption of parity between safety, fire and police, and that is true up to a point, when they retire. we investigated the fire department found a high incidence of pension spiking and we decided to put the numbers and report to show what the pensions of firefighters are receiving. you can see from the appendix in the report that a significant number of firefighters are many are earning much higher pensions than the police officers in the city. and you can make the assumption that perhaps because of the high incidence of spiking, that would attribute to the greater pension payouts to firefighters and two firefighters then the police. thank you. supervisor mar: if there is anybody else who would like to speak? good afternoon. i was the 4 per cent of the 2008-2009 grand jury. i think the grand jury has done a tremendous service to the residents and citizens of san francisco by bringing this issue to the forefront. we strongly supported the proposition d that was on the ballot this last june. i am not sure if that would have ever got as far if we had not issued our first pension report, but it prevailed and that is what was important. it is not it is unfortunate the three years was not in there so you would not have to make a recommendation this year. i also served the last two months on this last jury because they needed bodies. i am not going to politick on the present proposition that is on the ballot in november. i think the jury did a good job on the report, and i think the voters will have the last say. thank you. supervisor mar: thank you. mr. hansen? my name is richard hansen, speaking as a citizen of san francisco. at first, i want to congratulate supervisor mar and the other supervisors who gave such careful attention to this study. i think you have done a good job in reviewing the overall program. but as i sat back here and witnessed it, i agree with what was said earlier, convictions of reality. the grand jury, i can say because i have a family relationship with one of the members, who happened to work for the irs and really likes numbers she likes to deal with numbers altered in part the grand jury report for just one of the years. authored the grand jury report for just one of the years. they put a lot of effort in this. the people on the grand jury did not make anything for doing these things. they re not getting a pension from the city of san francisco. our mayor, are sometimes absent mayor was very anxious that the lieutenant governor, whenever she wants to be, has some very commendable staff people back here who have done a wonderful job and have fulfilled the commitment to back up the mayor and to defend the status quo. the reality is somewhere in between. i particularly appreciate or appreciate what mr. amelia said about the pension board, that the board represents the beneficiaries of the city pension. there is no question who they work for. they work for the board, and mr. amulius spoke for, representing the best interests of the retirees, the police and fire and so forth, all the people who are beneficiaries of this. but they are not representing the best interests of the taxpayers and the city of san francisco. who does speak for the taxpayers of san francisco? san francisco is a very political town, as we all know. we read as recently as this morning with the former mayor, willie brown, says, has said repeatedly about the way the elected in san francisco, don t mess with the police and fire department and the people who carried a wooden signs. the board of supervisors, unfortunately, in 2002, when they approved proposition h and i think one or two of you may have been on the board of supervisors at that time. it was slippery. a proposition h, and i have a copy of it, was with the many testimonials in favor of it would increase the pensions and make it possible for safety officials to retire at 90% after several years of service. there was no one who opposed it. the board of supervisors voted unanimously, 11-0, to support it. there was no one who wrote in opposition to it. supervisor mar: please wrap up? the people in 2002 and taxpayers were snookered, made a mistake. willie brown is admitting they made a mistake, and others, including former gray davis is admitting he made a mistake, and it is time to correct it. supervisor mar: thank you. is there anyone else who would like to speak? seeing none, public, disclosed. mr. cruz from the budget analyst office, i guess i need a motion from colleagues to incorporate to incorporate the testimony from the department heads into the board of supervisors responses to the findings and recommendations. without objection? supervisor chu: actually, just a quick question. mr. webber spoke earlier about the retirement funds earnings over time. do you have any comments or response to that during public comment? only that the fund is a long- term investment vehicle, and 10 years is not a long-term and investments. we could look at it over 30, 40, 50, 60 years, and i don t have those investment performance numbers. i have to believe they are hard than that over a longer time, and i could get something for you if you would like that. supervisor mar: thank you. supervisor chu? supervisor chu: and we called item number 2, also? supervisor mar: can we also call item no. 2, in addition to 1? item number two, resolution responding to the presiding judge of the superior court on the findings and recommendations in the 2009-2010 civil grand jury report entitled of a pension tsunami the billion dollar bubble. supervisor mar: thank you. we did not call it earlier. we have a motion to incorporate? i just want to follow-up with supervisor chu s question. actuary doesn t consider the past performance. that is part of what they look at. they look further back, long term, into the future. the fact that over the last 10 years we may have made less than 7.75% did not cause an actuary to recommend that you know where the assumed rate going forward, based on what happened the previous 10 years. they are in consultation with long-term estimates of what they can make on each of their pieces of the portfolio that are also considered. so just as part of their findings and reports to the board, they look and consider what has happened in the last 10 years. that also consider what has happened over the last 40 years, and based on recommendations of other experts, they make recommendations to the board that the 7.75% return it at least through this year. supervisor mar: thank you. supervisor chu? supervisor chu: thank you. it s just going through the different items, there are a number of different ones here, some that the mayor s office responded to in the mayor s office. after hearing some of the responses, i agree and don t agree with some of the points of the civil grand jury report, so i am comfortable with adopting most of them, but i think some of these may warrant adding a couple of things it to. if i could just go through them. on finding number one, which was the san francisco defined benefits let me step back. earlier, the civil grand jury, mr. weber talked about how we have a significant problem. i don t think any of us deny there is a significant pension obligation that the city will face in the next few years. jeff spoke earlier about how we either have a picture that everything is rosy or we have a significant problem, and which side we cheese. i don t think we choose one or the other. i think we recognize there is a significant problem but also the city has made some efforts to address it. however, if we don t take additional efforts, we will have to face other decisions and trade offs. he also spoke about how we had only a few million dollars to give to the school district this year. i want to separate that a little bit. just be clear to the public, we do not fund the school district generally. the school district is funded by the state. however, the city provides a portion of funding, prodding money through the rainy day funds. the rainy day funds are a function of how much revenue is that the city has. it does not have much connection to what the pension rights are for the city. i just wanted to clarify that component. going through the findings, finding a1, san francisco defined benefit plans, unsustainable without significant cutbacks in jobs in city services. at the end of the mayor s office disagrees with this completely i know that the mayor s office disagrees with this completely. for me personally, i agree with the fact that if we did not address the issues of the defined benefit programs and pensions that we will have significant trade of issues. i would not completely disagree with a component, but maybe what we can do and our response is say we partially agree with the findings that if there is not a significant solution to the pension issues that we might have significant trade-offs in the future, and maybe we can also acknowledged there has been efforts in the past from the propositions that have enacted that have gone towards helping that problem. that would be my suggestion on the first one. supervisor mar: i know that miss stevenson made similar remarks in her response. is there any suggestion to supervisor chu s language? there is no objection. supervisor chu: the second finding, most departments agree with that. finding b, would agree with the response. finding b1, in terms of the costly doubt in the civil grand jury report, i would note that these numbers are actually not incorrect. they are the numbers that the actuarial reports have laid out for us. it is just a matter of the civil grand jury report recording one portion of is it of it as knowing the other portion. i would say that would partially agree with the civil grand jury s findings because they are ex wherley what we are recording that they are actuaryally nowhere record, but they may impact the contributions rates and we would refer to the retirement funds numbers. i think it is true what they are saying, but is not the complete picture. supervisor mar: is there any objection to that? supervisor maxwell? supervisor maxwell: i want to make sure that we paint the correct picture, again, so it is clear this is part of this an area of the scenario. not the full picture, but supervisor mar: the grand jury report is highlighting the worst-case scenario and not giving the full range of different scenarios. without objection, item two. supervisor? on that one, i think if the words actuarially project it were put in there, there could be no feasible agreement. i think the department s hang their hat on a fine tune here. the facts remained that health benefits are going to increase, from $400 million to close to $1 billion in five years. that is on disputable. we have not heard heard anyone r that fact. the notion that the employer contribution is 9.94% in 2010 is accurate. this is where i think this is potentially off by the semantics of two words. i think this when they should be agreed with. i do not think we should partially agree disagree because of semantics. supervisor maxwell: people do not have the benefit at this hearing of a lot of the things we have heard today. i think it is important that we take a clear picture and say we agree with it personally. i agree with supervisor chu. i am more comfortable with that than simply saying this is how it is. i think at some point it is important to say it the way i believe. chairperson mar: it sounds like the committee is in agreement with supervisor chu s recommendation. supervisor elsbernd: i will make
getting pension-able lump-sum vacation pay out and things like that. i have already addressed this allowing employees from drawing two simultaneous pensions from different jobs. i m not clear on what is meant by the term pension pyramiding. if that means to jobs? that is not clear? supervisor mar: is there any reason why the pension income was from the department of health and not other departments? because they have trouble getting nursing supervisors, and you have to have nursing supervisors on duty. if somebody is willing to work extra hours, and we have rn s, too, with a full-time job, then have a separate appointment, may be working on the weekends extra shifts. and we need them because we have to provide care. that is really where it comes from. it is likely because they were asked to do it. it supervisor mar: okay, thank you. let s keep moving through the recommendations. supervisor chu: just a quick thing, are there any other departments that want to respond to recommendation b1? for the controller s office, this subject matter was in last year s report and there was a fair amount more detail on where we think the city s controls are in this areañr. it is true that this practice, if exists, which we don t think is a major issue here, but it is long and costly, and there is no underlying this agreement with the concept that is represented here. although we are not offering it auditing this specific issue, we have a zero audit program will be solid job classis, the departments, or functions on a regular basis and look at the appropriate payment in terms of premiums, whether or not they re being treated correctly by way of pay code, correctly included with pension compensation, that kind of thing. we have an audit program that addresses appropriate treatment of pay in that way. supervisor mar: thank you. are there any other departments that want to respond? ok. does anyone want to respond to any of the other recommendations made by the civil grand jury? we are all the way to f1 and f2 now. seeing none, and of colleagues don t have any other questions or points, let s open this up to public comment. we have our public defender, jeff, with us. thank you very much, supervisors. i am here as a private citizen, not just a public defender. if i was watching this on tv, i would either be confused or think there is no problem at all and everything was fine. there are two interpretations. you have the grand jury that studied this issue over two years and has indicated that our city is in huge trouble, describing it as a tsunami, or you have the presentation that you just heard the saying that we re doing everything we can and everything is fine. you have two very opposite conclusions that have been drawn here. which is it true? i can say that i have met with the controller s office again. the numbers are not five years from now but right now. how much are we spending on retirees pensions and health benefits for city employees? we are spending approximatelyçó$ 829 million. the city comptroller, whose opinion i trust because it is his job to provide independent analysis, says this number will go up by double in the next five years. double. it will be spending twice as much. by that time, about one-third of the money and resources that we have in the city is going to be going to pay benefits for city employees. that is not including salaries. that is just benefits. we know that five years ago, san francisco was paying $175 million per year in retirees pensions and health insurance premiums. we know that this year is close to $500 million. that does not include the health care costs for city employees, which according to the controller of this year is $456 million. that, of course, does not include and there is no there is a deficit of $4 billion of unfunded liability. we have made $4 billion of promises to city employees to cover their health care that we cannot pay for. the equivalent is like having a credit card, boeing tend thousand dollars, spending another $5,000, owing $10,000, spending another $5,000, and making the minimum payment. that is why the unfunded liability is growing. that is a problem. is that a tsunami, or is that, hey, don t worry about it, kick the can down the road? we know that is already happening. we are spending 28 times more pension and health-care costs on city employees than we are fixing streets. it would canceled summer school this year for 10 dousing kids because we did not have $4 million we canceled summer school this year for 10 dozen kids because we did not have the $4 million to fund the program. for tend thousand kids. this demands a solution and it requires it. thank you. supervisor mar: public defender, what is your solution? proposition b, that all city employees should contribute to their pensions. as of today, 11,000 people do. under prop b, all city employees would pay 9% or 10%. but also require them to share more of the costs of health care. supervisor mar: thank you so much. thank you. supervisor mar: i only have one car from a speaker, but others come forward if you would like to speak. richard roth men? richard rothman? first, thank you for changing the day of the meeting. i appreciate that. i just want to say that i am paid for the grand jury report. they talk about the average city worker, and they did not want to report to presume the average city worker is making a large pension and works hard and gets an average pension. the average pension, i got these figures from the retirement board, the average pension including police, fire and miscellaneous per year is just over $33,000. the average pension for miscellaneous workers, excluding police and fire is $25,000. why didn t the penchant why didn t the grand jury talk about the average city worker? also talking about proposition b, in 2008, which i helped negotiate, they completely left out one of the most important reports, that we change the five-year vesting for health benefits. now to get full health benefits, one has to work 20 years and also one has to get the benefits with i believe is within 180 days. from the past, people could come from one department, worked five years, and ms. callahan said it would only have to work six months and go back to another job, especially state employees. we changed this. the unions recognize there is a problem, and we have been working on this problem. i just think that the grand jury needed to present all of the facts about what is going on and it needs to mention what the average city retiree, employee receives. thank you. supervisor mar: thank you, mr. rothman. walter, please come forward. it seems like we are working in the city until the sun don t shine until i want some pension behind and bring it on backe i hope the pension comes back someday come what may, i am city blue by you we work and work kind and we will stand by you. and the fishing with their sales afloat we would like our pension act that familiar money could you bring it back, please? supervisor mar: thank you. mr. denny? thank you for the opportunity to speak here today. i am a small business owner with 16 employees. i provide health care and i don t get a dime of public money. despite that, our firm generates over $200,000 in various taxes to various agencies, yet for all this, i earn a salary of $80,000 with no pension and no savings. everything that i have is in my business, and yet, despite my contribution to government, i live hand to mouth. in this way, i am like most san francisco citizens and taxpayers. you all must know how incredibly opulent these compensation packages appear to the average san franciscan taxpayer and citizen. i applaud prop b and only criticize it does not go nearly far enough, and i urge you to please consider those people who are out there paying for these bills and avoid for yourselves the appearance of telling us all, let them eat cake. thank you. supervisor mar: thank you. miss shirley henson? i know that retirement contacts cannot be changed. they are fixed in stone. but increasing costs must either be paid by new taxes and fees, by abolishing city jobs, abolishing city services, or the tooth fairy. or by raising employee contributions. and the costs to keep the well- intended promises will impact the basic city services and erode the quality of life for our youth, the port, the disabled and the elderly, and all citizens who have no union or lobby to represent their interests. and i know that the union officials bargained in good faith during prosperous times and then shared the largess by making generous pension and health-care promises to the employees, and the voter seconded with the unions and officials started. but the taxpayers can no longer afford these generous benefits. and so i urge you to do something about it. supervisor mar: thank you. i want to thank mr. weber and the two years of war for not just this report and for the two years of not just working on this report but the hard work of the civil grand jury. mr. weber? i just want to make a short comment. when supervisor chu referred to the return on the pension fund, with the city s contribution rate will be in five years, there was some discussion of whether it is 30%, 27%, 26%. at one of the assumptions that the san francisco retirement system has made, or the actuarial firm that did the stress tests on the pension fund, was 7.75% return. it is my understanding from the actuary at the return on the fund over the last 10 years, on average, is only 4.5%. that is nowhere near 7.75%. the blackstone group, which is an international money management firm, has given testimony to calpers, and they basically said the% assumption that calpers has used an editorial evaluation is way off the mark and basically said the 8% assumption is way off the mark. san francisco reduced their return assumption to 7.75% two years ago. the fact that the history does not really show returns of that amount is significant and was not discussed here. the other point i want to make is just the cost of pensions. we did not talk all about the appendix in the report which shows the actual pensions ever paid. there was no discussion about the $100,000 club. 900 retired city workers make pensions in excess of $100,000. one out of every four firefighters who retires from san francisco is getting a pension of $100,000 or more. the fire department and police officers retired life behind fire. there is always this assumption of parity between safety, fire and police, and that is true up to a point, when they retire. we investigated the fire department found a high incidence of pension spiking and we decided to put the numbers and report to show what the pensions of firefighters are receiving. you can see from the appendix in the report that a significant number of firefighters are many are earning much higher pensions than the police officers in the city. and you can make the assumption that perhaps because of the high incidence of spiking, that would attribute to the greater pension payouts to firefighters and two firefighters then the police. thank you. supervisor mar: if there is anybody else who would like to speak? good afternoon. i was the 4 per cent of the 2008-2009 grand jury. i think the grand jury has done a tremendous service to the residents and citizens of san francisco by bringing this issue to the forefront. we strongly supported the proposition d that was on the ballot this last june. i am not sure if that would have ever got as far if we had not issued our first pension report, but it prevailed and that is what was important. it is not it is unfortunate the three years was not in there so you would not have to make a recommendation this year. i also served the last two months on this last jury because they needed bodies. i am not going to politick on the present proposition that is on the ballot in november. i think the jury did a good job on the report, and i think the voters will have the last say. thank you. supervisor mar: thank you. mr. hansen? my name is richard hansen, speaking as a citizen of san francisco. at first, i want to congratulate supervisor mar and the other supervisors who gave such careful attention to this study. i think you have done a good job in reviewing the overall program. but as i sat back here and witnessed it, i agree with what was said earlier, convictions of reality. the grand jury, i can say because i have a family relationship with one of the members, who happened to work for the irs and really likes numbers she likes to deal with numbers altered in part the grand jury report for just one of the years. authored the grand jury report for just one of the years. they put a lot of effort in this. the people on the grand jury did not make anything for doing these things. they re not getting a pension from the city of san francisco. our mayor, are sometimes absent mayor was very anxious that the lieutenant governor, whenever she wants to be, has some very commendable staff people back here who have done a wonderful job and have fulfilled the commitment to back up the mayor and to defend the status quo. the reality is somewhere in between. i particularly appreciate or appreciate what mr. amelia said about the pension board, that the board represents the beneficiaries of the city pension. there is no question who they work for. they work for the board, and mr. amulius spoke for, representing the best interests of the retirees, the police and fire and so forth, all the people who are beneficiaries of this. but they are not representing the best interests of the taxpayers and the city of san francisco. who does speak for the taxpayers of san francisco? san francisco is a very political town, as we all know. we read as recently as this morning with the former mayor, willie brown, says, has said repeatedly about the way the elected in san francisco, don t mess with the police and fire department and the people who carried a wooden signs. the board of supervisors, unfortunately, in 2002, when they approved proposition h and i think one or two of you may have been on the board of supervisors at that time. it was slippery. a proposition h, and i have a copy of it, was with the many testimonials in favor of it would increase the pensions and make it possible for safety officials to retire at 90% after several years of service. there was no one who opposed it. the board of supervisors voted unanimously, 11-0, to support it. there was no one who wrote in opposition to it. supervisor mar: please wrap up? the people in 2002 and taxpayers were snookered, made a mistake. willie brown is admitting they made a mistake, and others, including former gray davis is admitting he made a mistake, and it is time to correct it. supervisor mar: thank you. is there anyone else who would like to speak? seeing none, public, disclosed. mr. cruz from the budget analyst office, i guess i need a motion from colleagues to incorporate to incorporate the testimony from the department heads into the board of supervisors responses to the findings and recommendations. without objection? supervisor chu: actually, just a quick question. mr. webber spoke earlier about the retirement funds earnings over time. do you have any comments or response to that during public comment? only that the fund is a long- term investment vehicle, and 10 years is not a long-term and investments. we could look at it over 30, 40, 50, 60 years, and i don t have those investment performance numbers. i have to believe they are hard than that over a longer time, and i could get something for you if you would like that. supervisor mar: thank you. supervisor chu? supervisor chu: and we called item number 2, also? supervisor mar: can we also call item no. 2, in addition to 1? item number two, resolution responding to the presiding judge of the superior court on the findings and recommendations in the 2009-2010 civil grand jury report entitled of a pension tsunami the billion dollar bubble. supervisor mar: thank you. we did not call it earlier. we have a motion to incorporate? i just want to follow-up with supervisor chu s question. actuary doesn t consider the past performance. that is part of what they look at. they look further back, long term, into the future. the fact that over the last 10 years we may have made less than 7.75% did not cause an actuary to recommend that you know where the assumed rate going forward, based on what happened the previous 10 years. they are in consultation with long-term estimates of what they can make on each of their pieces of the portfolio that are also considered. so just as part of their findings and reports to the board, they look and consider what has happened in the last 10 years. that also consider what has happened over the last 40 years, and based on recommendations of other experts, they make recommendations to the board that the 7.75% return it at least through this year. supervisor mar: thank you. supervisor chu? supervisor chu: thank you. it s just going through the different items, there are a number of different ones here, some that the mayor s office responded to in the mayor s office. after hearing some of the responses, i agree and don t agree with some of the points of the civil grand jury report, so i am comfortable with adopting most of them, but i think some of these may warrant adding a couple of things it to. if i could just go through them. on finding number one, which was the san francisco defined benefits let me step back. earlier, the civil grand jury, mr. weber talked about how we have a significant problem. i don t think any of us deny there is a significant pension obligation that the city will face in the next few years. jeff spoke earlier about how we either have a picture that everything is rosy or we have a significant problem, and which side we cheese. i don t think we choose one or the other. i think we recognize there is a significant problem but also the city has made some efforts to address it. however, if we don t take additional efforts, we will have to face other decisions and trade offs. he also spoke about how we had only a few million dollars to give to the school district this year. i want to separate that a little bit. just be clear to the public, we do not fund the school district generally. the school district is funded by the state. however, the city provides a portion of funding, prodding money through the rainy day funds. the rainy day funds are a function of how much revenue is that the city has. it does not have much connection to what the pension rights are for the city. i just wanted to clarify that component. going through the findings, finding a1, san francisco defined benefit plans, unsustainable without significant cutbacks in jobs in city services. at the end of the mayor s office disagrees with this completely i know that the mayor s office disagrees with this completely. for me personally, i agree with the fact that if we did not address the issues of the defined benefit programs and pensions that we will have significant trade of issues. i would not completely disagree with a component, but maybe what we can do and our response is say we partially agree with the findings that if there is not a significant solution to the pension issues that we might have significant trade-offs in the future, and maybe we can also acknowledged there has been efforts in the past from the propositions that have enacted that have gone towards helping that problem. that would be my suggestion on the first one. supervisor mar: i know that miss stevenson made similar remarks in her response. is there any suggestion to supervisor chu s language? there is no objection. supervisor chu: the second finding, most departments agree with that. finding b, would agree with the response. finding b1, in terms of the costly doubt in the civil grand jury report, i would note that these numbers are actually not incorrect. they are the numbers that the actuarial reports have laid out for us. it is just a matter of the civil grand jury report recording one portion of is it of it as knowing the other portion. i would say that would partially agree with the civil grand jury s findings because they are ex wherley what we are recording that they are actuaryally nowhere record, but they may impact the contributions rates and we would refer to the retirement funds numbers. i think it is true what they are saying, but is not the complete picture. supervisor mar: is there any objection to that? supervisor maxwell? supervisor maxwell: i want to make sure that we paint the correct picture, again, so it is clear this is part of this an area of the scenario. not the full picture, but supervisor mar: the grand jury report is highlighting the worst-case scenario and not giving the full range of different scenarios. without objection, item two. supervisor? on that one, i think if the words actuarially project it were put in there, there could be no feasible agreement. i think the department s hang their hat on a fine tune here. the facts remained that health benefits are going to increase, from $400 million to close to $1 billion in five years. that is on disputable. we have not heard heard anyone r that fact. the notion that the employer contribution is 9.94% in 2010 is accurate. this is where i think this is potentially off by the semantics of
to the board of supervisors. each of the seven, they are exactly the same responsibility. they have a soul and undivided loyalty to act in the best interests of the members and their beneficiaries. there are no public interests members. secondly, there were a number of vacancies on the boardñi of, and the mayor hasñi subsequent to ts report filled them. we nowçó have seven full positions. the third thing that was mentioned, it is not as detailed as it was in some of the underpinnings, are the efforts of our board members, in addition to the monthly board meetings which they reflect, there was absolutely no recognition or acknowledgement of the fact that our board, but the board of supervisors, has a huge committee structure resulting in probably double the amount of meetings on top of board meetings. there was no reflection of any of theñi work or efforts at the committee s undertake doing the board s work as well, and we wanted to point that out to you. supervisor mar: okay, thank you. anything else on the findings? colleagues? we have a number of recommendations. i would just read off the board of supervisorsçó response. we are required to respond to a1, b1, b2,ñr b3, c1, c2, e1, f, f2. i m wondering if we need to go one by one or just call generally for the department s responses for the specific recommendations on the reports? colleagues, is that ok? so from the recommendations, maybe i could just go through the first several. a1, b1, b2, b3, there are a number of recommendations made by the civil grand jury. i would ask if any of the department heads would like to respond to any of those? it looks like a1 requires further analysis, according to the mayor s office responseb1, b2, b3 have a number of different responses that have already been implemented from b1 to b2, suggestions disagreed will not be implemented, already implemented will not be implemented. that is from b2. maybe we can go to that once and there s some disagreement from the recommendation. b2 is on the sciu local agreement and on the flop, and the recommendation was dhr should not enter into agreements with unions that increase pension obligations without voter approval. they should engage the actuary to put it any pension compensation. there is a little bit of a difference in their responses. ms. callahan? and i think a response from dhr has already implemented will not be implemented. am i am sorry, i am sorry, on the finding b2? supervisor mar: 1 the agreement. it would be, in our view, in violation of our obligations to negotiate under the charter and under state law. where we have to send people to the bargaining table who are authorized to negotiate and make an agreement, and we would not beñr able to complete that process. and meet our obligations if we were to run every proposal through professional actuary. we cannot do it, and it is not done anywhere. we think we are meeting the intent of working with the retirement system. this does not have an impact on the pension obligations. supervisor mar: thank you. supervisor chu? supervisor chu: i know there are a number of recommendations the board is charged to respond to. one of them that i was interested in meeting with the department specifically is recommendation d1. this is the one that talks about san francisco should take steps to curb abuses from pension spiking by eliminating the final pension income and employe can climb on retirement from pension pyramiding. the jury suggest the three-year formula, limiting the final pension compensation to 120% of the rate paid, independent review of the comptroller disallowing employes from drawing pensions from two and tinias city jobs, and pension compensation should not include separate pay from different pay types, known as pension pyramiding. you actuallyñr missed one. they also recommend that we do a three-year average to determine final compensation. supervisor chu: yes. supervisors, without getting on coli redundant, i would say the three-year average without getting on truly redundant, i would say the three-year averages what is being pursued statewide. i would not call it to eliminate spiking, but it is to smooth out the contributions and the final pay so it does not have an undue impact on final obligations. we have not evaluated the final compensation to 120%. but it is something we would be willing to work with the retirement system on if there was a measure looking at it. i would leave it to the controller to respond on independent reviews. although i understand the retirement system has eliminated spiking, they can speak to that. where it would import forms of compensation which are not supposed to be what we would call pension-able and make them pension-able,. my understanding is san francisco limited many years ago some of the practices that we read about in the paper across the state, in terms of people getting pension-able lump-sum vacation pay out and things like that. i have already addressed this allowing employees from drawing two simultaneous pensions from different jobs. i m not clear on what is meant by the term pension pyramiding. if that means to jobs? that is not clear? supervisor mar: is there any reason why the pension income was from the department of health and not other departments? because they have trouble getting nursing supervisors, and you have to have nursing supervisors on duty. if somebody is willing to work extra hours, and we have rn s, too, with a full-time job, then have a separate appointment, may be working on the weekends extra shifts. and we need them because we have to provide care. that is really where it comes from. it is likely because they were asked to do it. it supervisor mar: okay, thank you. let s keep moving through the recommendations. supervisor chu: just a quick thing, are there any other departments that want to respond to recommendation b1? for the controller s office, this subject matter was in last year s report and there was a fair amount more detail on where we think the city s controls are in this areañr. it is true that this practice, if exists, which we don t think is a major issue here, but it is long and costly, and there is no underlying this agreement with the concept that is represented here. although we are not offering it auditing this specific issue, we have a zero audit program will be solid job classis, the departments, or functions on a regular basis and look at the appropriate payment in terms of premiums, whether or not they re being treated correctly by way of pay code, correctly included with pension compensation, that kind of thing. we have an audit program that addresses appropriate treatment of pay in that way. supervisor mar: thank you. are there any other departments that want to respond? ok. does anyone want to respond to any of the other recommendations made by the civil grand jury? we are all the way to f1 and f2 now. seeing none, and of colleagues don t have any other questions or points, let s open this up to public comment. we have our public defender, jeff, with us. thank you very much, supervisors. i am here as a private citizen, not just a public defender. if i was watching this on tv, i would either be confused or think there is no problem at all and everything was fine. there are two interpretations. you have the grand jury that studied this issue over two years and has indicated that our city is in huge trouble, describing it as a tsunami, or you have the presentation that you just heard the saying that we re doing everything we can and everything is fine. you have two very opposite conclusions that have been drawn here. which is it true? i can say that i have met with the controller s office again. the numbers are not five years from now but right now. how much are we spending on retirees pensions and health benefits for city employees? we are spending approximatelyçó$ 829 million. the city comptroller, whose opinion i trust because it is his job to provide independent analysis, says this number will go up by double in the next five years. double. it will be spending twice as much. by that time, about one-third of the money and resources that we have in the city is going to be going to pay benefits for city employees. that is not including salaries. that is just benefits. we know that five years ago, san francisco was paying $175 million per year in retirees pensions and health insurance premiums. we know that this year is close to $500 million. that does not include the health care costs for city employees, which according to the controller of this year is $456 million. that, of course, does not include and there is no there is a deficit of $4 billion of unfunded liability. we have made $4 billion of promises to city employees to cover their health care that we cannot pay for. the equivalent is like having a credit card, boeing tend thousand dollars, spending another $5,000, owing $10,000, spending another $5,000, and making the minimum payment. that is why the unfunded liability is growing. that is a problem. is that a tsunami, or is that, hey, don t worry about it, kick the can down the road? we know that is already happening. we are spending 28 times more pension and health-care costs on city employees than we are fixing streets. it would canceled summer school this year for 10 dousing kids because we did not have $4 million we canceled summer school this year for 10 dozen kids because we did not have the $4 million to fund the program. for tend thousand kids. this demands a solution and it requires it. thank you. supervisor mar: public defender, what is your solution? proposition b, that all city employees should contribute to their pensions. as of today, 11,000 people do. under prop b, all city employees would pay 9% or 10%. but also require them to share more of the costs of health care. supervisor mar: thank you so much. thank you. supervisor mar: i only have one car from a speaker, but others come forward if you would like to speak. richard roth men? richard rothman? first, thank you for changing the day of the meeting. i appreciate that. i just want to say that i am paid for the grand jury report. they talk about the average city worker, and they did not want to report to presume the average city worker is making a large pension and works hard and gets an average pension. the average pension, i got these figures from the retirement board, the average pension including police, fire and miscellaneous per year is just over $33,000. the average pension for miscellaneous workers, excluding police and fire is $25,000. why didn t the penchant why didn t the grand jury talk about the average city worker? also talking about proposition b, in 2008, which i helped negotiate, they completely left out one of the most important reports, that we change the five-year vesting for health benefits. now to get full health benefits, one has to work 20 years and also one has to get the benefits with i believe is within 180 days. from the past, people could come from one department, worked five years, and ms. callahan said it would only have to work six months and go back to another job, especially state employees. we changed this. the unions recognize there is a problem, and we have been working on this problem. i just think that the grand jury needed to present all of the facts about what is going on and it needs to mention what the average city retiree, employee receives. thank you. supervisor mar: thank you, mr. rothman. walter, please come forward. it seems like we are working in the city until the sun don t shine until i want some pension behind and bring it on backe i hope the pension comes back someday come what may, i am city blue by you we work and work kind and we will stand by you. and the fishing with their sales afloat we would like our pension act that familiar money could you bring it back, please? supervisor mar: thank you. mr. denny? thank you for the opportunity to speak here today. i am a small business owner with 16 employees. i provide health care and i don t get a dime of public money. despite that, our firm generates over $200,000 in various taxes to various agencies, yet for all this, i earn a salary of $80,000 with no pension and no savings. everything that i have is in my business, and yet, despite my contribution to government, i live hand to mouth. in this way, i am like most san francisco citizens and taxpayers. you all must know how incredibly opulent these compensation packages appear to the average san franciscan taxpayer and citizen. i applaud prop b and only criticize it does not go nearly far enough, and i urge you to please consider those people who are out there paying for these bills and avoid for yourselves the appearance of telling us all, let them eat cake. thank you. supervisor mar: thank you. miss shirley henson? i know that retirement contacts cannot be changed. they are fixed in stone. but increasing costs must either be paid by new taxes and fees, by abolishing city jobs, abolishing city services, or the tooth fairy. or by raising employee contributions. and the costs to keep the well- intended promises will impact the basic city services and erode the quality of life for our youth, the port, the disabled and the elderly, and all citizens who have no union or lobby to represent their interests. and i know that the union officials bargained in good faith during prosperous times and then shared the largess by making generous pension and health-care promises to the employees, and the voter seconded with the unions and officials started. but the taxpayers can no longer afford these generous benefits. and so i urge you to do something about it. supervisor mar: thank you. i want to thank mr. weber and the two years of war for not just this report and for the two years of not just working on this report but the hard work of the civil grand jury. mr. weber? i just want to make a short comment. when supervisor chu referred to the return on the pension fund, with the city s contribution rate will be in five years, there was some discussion of whether it is 30%, 27%, 26%. at one of the assumptions that the san francisco retirement system has made, or the actuarial firm that did the stress tests on the pension fund, was 7.75% return. it is my understanding from the actuary at the return on the fund over the last 10 years, on average, is only 4.5%. that is nowhere near 7.75%. the blackstone group, which is an international money management firm, has given testimony to calpers, and they basically said the% assumption that calpers has used an editorial evaluation is way off the mark and basically said the 8% assumption is way off the mark. san francisco reduced their return assumption to 7.75% two years ago. the fact that the history does not really show returns of that amount is significant and was not discussed here. the other point i want to make is just the cost of pensions. we did not talk all about the appendix in the report which shows the actual pensions ever paid. there was no discussion about the $100,000 club. 900 retired city workers make pensions in excess of $100,000. one out of every four firefighters who retires from san francisco is getting a pension of $100,000 or more. the fire department and police officers retired life behind fire. there is always this assumption of parity between safety, fire and police, and that is true up to a point, when they retire. we investigated the fire department found a high incidence of pension spiking and we decided to put the numbers and report to show what the pensions of firefighters are receiving. you can see from the appendix in the report that a significant number of firefighters are many are earning much higher pensions than the police officers in the city. and you can make the assumption that perhaps because of the high incidence of spiking, that would attribute to the greater pension payouts to firefighters and two firefighters then the police. thank you. supervisor mar: if there is anybody else who would like to speak? good afternoon. i was the 4 per cent of the 2008-2009 grand jury. i think the grand jury has done a tremendous service to the residents and citizens of san francisco by bringing this issue to the forefront. we strongly supported the proposition d that was on the ballot this last june. i am not sure if that would have ever got as far if we had not issued our first pension report, but it prevailed and that is what was important. it is not it is unfortunate the three years was not in there so you would not have to make a recommendation this year. i also served the last two months on this last jury because they needed bodies. i am not going to politick on the present proposition that is on the ballot in november. i think the jury did a good job on the report, and i think the voters will have the last say. thank you. supervisor mar: thank you. mr. hansen? my name is richard hansen, speaking as a citizen of san francisco. at first, i want to congratulate supervisor mar and the other supervisors who gave such careful attention to this study. i think you have done a good job in reviewing the overall program. but as i sat back here and witnessed it, i agree with what was said earlier, convictions of reality. the grand jury, i can say because i have a family relationship with one of the members, who happened to work for the irs and really likes numbers she likes to deal with numbers altered in part the grand jury report for just one of the years. authored the grand jury report for just one of the years. they put a lot of effort in this. the people on the grand jury did not make anything for doing these things. they re not getting a pension from the city of san francisco. our mayor, are sometimes absent mayor was very anxious that the lieutenant governor, whenever she wants to be, has some very commendable staff people back here who have done a wonderful job and have fulfilled the commitment to back up the mayor and to defend the status quo. the reality is somewhere in between. i particularly appreciate or appreciate what mr. amelia said about the pension board, that the board represents the beneficiaries of the city pension. there is no question who they work for. they work for the board, and mr. amulius spoke for, representing the best interests of the retirees, the police and fire and so forth, all the people who are beneficiaries of this. but they are not representing the best interests of the taxpayers and the city of san francisco. who does speak for the taxpayers of san francisco? san francisco is a very political town, as we all know. we read as recently as this morning with the former mayor, willie brown, says, has said repeatedly about the way the elected in san francisco, don t mess with the police and fire department and the people who carried a wooden signs. the board of supervisors, unfortunately, in 2002, when they approved proposition h and i think one or two of you may have been on the board of supervisors at that time. it was slippery. a proposition h, and i have a copy of it, was with the many testimonials in favor of it would increase the pensions and make it possible for safety officials to retire at 90% after several years of service. there was no one who opposed it. the board of supervisors voted unanimously, 11-0, to support it. there was no one who wrote in opposition to it. supervisor mar: please wrap up? the people in 2002 and taxpayers were snookered, made a mistake. willie brown is admitting they made a mistake, and others, including former gray davis is admitting he made a mistake, and it is time to correct it. supervisor mar: thank you. is there anyone else who would like to speak? seeing none, public, disclosed. mr. cruz from the budget analyst office, i guess i need a motion from colleagues to incorporate to incorporate the testimony from the department heads into the board of supervisors responses to the findings and recommendations. without objection? supervisor chu: actually, just a quick question. mr. webber spoke earlier about the retirement funds earnings over time. do you have any comments or response to that during public comment? only that the fund is a long- term investment vehicle, and 10 years is not a long-term and investments. we could look at it over 30, 40, 50, 60 years, and i don t have those investment performance numbers. i have to believe they are hard than that over a longer time, and i could get something for you if you would like that. supervisor mar: thank you. supervisor chu? supervisor chu: and we called item number 2, also? supervisor mar: can we also call item no. 2, in addition to 1? item number two, resolution item number two, resolution responding to the presiding