Fortune senior editor Adam Lashinsky digs into the origins of San Francisco's pension reform debate, where an interesting "controlled experiment" in democratic governance is unfolding. Can a politically far-left city with a major pension problem on its hands provide other state and local governments with lessons in pension reform? The commitment seems to be there, much more so than in many other places.
Venture capitalist Maurice Mortiz became involved after he was
contacted by the city's public defender, Jeff Adachi. Back in 2008
Adachi began to see the budgetary effects of rising pension costs:
fewer funds for city programs. The numbers are daunting. This year San
Franciso paid $357 million towards the pension system, a number
expected to double in the next few years. The unfunded pension liaility
per resident is $34,940, three times average for other California local
governments. And that doesn't factor in $4.36 billion in unfunded
health benefits for city employees.
The Moritz-Adachi plan to fix the system includes increasing employee contributions to as much as 16 percent of salary. A competing plan put forth by private equity financier Warren Hellman and firefighter union president Tom O'Connor suggest an employee contribution of 11 percent, an increased reliance on actuarial smoothing and a high discount rate to improve the fund's outlook: a big weakness of the proposal.
The article provides an inside-baseball analysis of the two factions and where their proposals are likely to lead. Whatever the outcome the lesson of San Francisco to other governments is this: good policy starts with an objective look at the books.
The Moritz-Adachi plan to fix the system includes increasing employee contributions to as much as 16 percent of salary. A competing plan put forth by private equity financier Warren Hellman and firefighter union president Tom O'Connor suggest an employee contribution of 11 percent, an increased reliance on actuarial smoothing and a high discount rate to improve the fund's outlook: a big weakness of the proposal.
The article provides an inside-baseball analysis of the two factions and where their proposals are likely to lead. Whatever the outcome the lesson of San Francisco to other governments is this: good policy starts with an objective look at the books.
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