Fail: 113894 / 43.04% Yes votes ...... 150734 / 56.96% No votes

See Also: Index of all Propositions

Summary Prepared by The Ballot Simplification Committee:

The Way It Is Now: The City provides retirement benefits to employees and retirees through its Retirement System and health benefits through its Health Service System. Both the City and covered employees contribute to funding those systems.

The Unified School District, Community College District and Superior Court participate in the City's Retirement System and Health Service System, but not all of their employees participate.

The uniformed members of the Sheriff's Department and certain other employees participate in the California Public Employees Retirement System and not in the City's Retirement System.

The Charter sets the contribution rate employees must pay to the Retirement System. For most City employees, that rate is 7.5% of compensation. The City and other participating employers pay the balance needed to fund the system. Under collective bargaining agreements, the City sometimes has agreed to pay the Charter-required employee contribution to the Retirement System.

The City averages the amount paid by California's 10 most populated counties to set the minimum amount that the four employers contribute to the Health Service System. Participating employees and retirees also contribute to the system. Under some collective bargaining agreements, participating employers have agreed to pay additional costs for employee and dependent medical, vision and dental coverage.

The Proposal: Proposition B is a Charter amendment that would increase employee contributions to the Retirement System, decrease employers' contributions to the Health Service System and change rules for arbitration proceedings about City collective bargaining agreements. Proposition B would increase required employee contributions to the Retirement System, and reduce the employers' share of funding that system, as follows:

• Uniformed members of the police and fire departments (but not of the Sheriff's department) would contribute up to 10% of their compensation to fund retirement benefits. This increase would not exceed the amount needed to pay the added costs of increased police and fire retirement benefits resulting from the 2002 Charter amendment. (Prop H, see "Words You Need to Know")
• Other employees in the Retirement System would contribute 9.0% of their compensation to fund retirement benefits.
• In future collective bargaining agreements, the City, but not the other three employers, would be prohibited from paying any portion of the employee contribution.

• For medical coverage, employers could pay only the 10-county average amount.
• The City, but not the other three employers, would be prohibited from paying any additional costs for employee coverage.
• For employee dependent health care coverage, the City, but not the other three employers, would reduce its contribution to no more than 50% of the cost of the least expensive plan the Health Services System offers for each level of coverage.
• For dental plans, the City, but not the other three employers, would contribute no more than 75% of the cost of employee coverage and 50% of the cost of dependent coverage.

Proposition B would take effect on January 1, 2011. Some provisions would take effect only when current collective bargaining agreements expire.

Fiscal Impact from The Controller of San Francisco:

City Controller Ben Rosenfield has issued the following statement on the fiscal impact of Proposition B:

Should the proposed charter amendment be approved by the voters, in my opinion, the City will have significantly reduced costs for providing employee retirement benefits and health care benefits, with those costs being shifted from the City government to City employees. Annual savings to the City would total approximately $121 million by fiscal year 2013-2014, assuming current workforce levels and healthcare utilization. This includes approximately $73 million in savings to the City's General Fund, and $48 million in savings to other enterprise funds such as the Airport and Public Utilities Commission funds.

Employee and City Government Medical, Dependent and Dental Care Payments: The proposed charter amendment increases medical care contributions from all City employees and limits the amount the City would pay. Currently, the monthly amount paid by the City for each employee's medical benefits is determined through a Charter-required survey of the amount paid for this same purpose by the ten most populous counties in California. For FY2010-2011, that amount is $473 per employee per month. In addition, under most labor agreements, the City pays the full cost of `single' medical benefits for those employees who have no dependents on their medical plan. For fiscal year 2010-11, the total City cost of both of these medical benefits is approximately $178 million citywide. The proposed charter amendment would prohibit the City from paying the additional `single' medical benefit costs as part of any labor agreement, and shift those costs from the City government to City employees.

The proposed charter amendment increases dependent medical care contributions from all City employees and limits the amount the City would pay. Currently, the monthly amount paid by the City for dependent medical care costs is negotiated in labor agreements. Under most labor agreements, for each employee who has dependents the City pays an amount equal to 75% of the lowest plan cost for a family. For FY2010-11, that amount is between $481 and $660 per employee per month, with a total City cost of approximately $125 million citywide. For dental care, under most labor agreements, the City pays 100% of the cost of family coverage. For FY2010-2011, that amount is $132 per employee per month with a total City cost of approximately $44 million citywide. Under the proposed charter amendment the City could pay no more than 50% of the cost of dependent health and dental care and 75% of the cost of employee dental care. The balance of health and dental costs are shifted from the City government to City employees.

The Health Service System's actuary estimates annual savings to the City under the health, dependent and dental care provisions of the amendment would be approximately $83 million annually based on the fiscal year 2010-2011 premium rates. This amount includes approximately $13 million in savings for `single' medical care, $53 million in savings for dependent care, and $17 million in savings for dental care. Note that these amounts are not reductions to insurance plan rates or to the cost of care, rather a shift of the cost from the City government to City employees.

Employee and City Government Retirement Payments: The proposed charter amendment increases required contribution rates to fund retirement benefits from all City employees and decreases the amount the City would pay. Currently, most employees pay 7.5% of salary to fund their retirement benefits. Employee contributions would increase from 7.5% to up to 10% of salary for uniformed Police and Fire employees and from 7.5% to 9% of salary for all other employees. The charter amendment also prohibits the City from paying for any portion of this required employee contribution as a part of a labor agreement. Because of these increased employee contributions, the proposed charter amendment would decrease the amount the City government must contribute to fund retirement benefits. Each year required retirement contribution rates are set based on actuarial analysis. In fiscal year 2010-2011, the City's required contribution will be 13.6% of payroll or approximately $325 million. By fiscal year 2013-2014, the City's contribution rate is projected to increase to an estimated 22.8% of payroll or approximately $576 million. Actuarial analysis of the proposed Charter amendment is that net annual savings to the City would be approximately 1.5% of payroll, or approximately $38 million by fiscal year 2013-2014. The City's savings attributable to the shift in cost to employees are somewhat reduced by a higher total cost of retirement benefits resulting from increased employee withdrawal rights and total benefits amounts that will be outcomes of the measure.

Additional Costs or Savings: There may be significant additional costs or savings to the City as a result of the proposed charter amendment. For example, increases in employee medical care costs will likely result in individuals opting for lower cost plans or decreasing the number of dependents enrolled, resulting in additional savings to the City. Increases in employee payments for retirement and medical costs under the proposed charter amendment could be offset by wage increases and related fringe benefit costs negotiated in future labor agreements or awarded in labor arbitrations, resulting in additional costs to the City. There may also be impacts of the proposed charter amendment under the national health care reform provisions.