RE: [lpsf-activists] Re: Ballot Measures for November 2013

I’ll third that. Excellent analysis!
Francoise

Subject: [lpsf-activists] Re: Ballot Measures for November 2013
From: “lpsfactivists” <amarcyb@hotmail.com>
Date: Mon, August 12, 2013 1:17 am
To: lpsf-activists@yahoogroups.com

I second that!!!

Marcy

Matthew…thank you for that very well articulated analysis. Much appreciated.

Mike

From: lpsf-activists@yahoogroups.com [mailto:lpsf-activists@yahoogroups.com] On Behalf Of Matthew Murphy
Sent: Monday, August 12, 2013 12:47 AM
To: Aubrey Freedman
Cc: LPSF Activist List
Subject: [lpsf-activists] Re: Ballot Measures for November 2013

Aubrey,

I’ve summarized Supervisor Farrell’s retiree-health-care item for others’ review, and suggested some basis for a position on it below. My message is divided into three pieces:

  1. Existing Law
  2. Details of the Measure
  3. Potential LP Positioning

Existing Law

The RHTCF is an existing entity:
http://www.sfcontroller.org/index.aspx?page=472

It was established by Section 12.204 of the San Francisco City Charter:
http://www.amlegal.com/nxt/gateway.dll/California/charter_sf/articlexiiemployeeretirementandhealthser?f=templates$fn=document-frame.htm$3.0#JD_12.204

Section A8.432 has some specifics:
http://www.amlegal.com/nxt/gateway.dll/California/charter_sf/appendixaemploymentprovisions*?f=templates$fn=document-frame.htm$3.0$q=$x=#LPTOC34

The following organizations may participate in the RHTCF:

  1. Superior Court of California, County of San Francisco
  2. SF Unified School District
  3. SF Community College District
  4. City and County of San Francisco

The Measure

The full measure is here:
http://sfgov2.org/ftp/uploadedfiles/elections/candidates/Nov2013/Nov2013_RetireeHealthCareTrustFund.pdf

At a high-level, the ballot measure includes the following changes:

  1. The explicit limitation barring disbursements from the Retiree Health Care Trust Fund until 2020 is removed.

  2. The RHTCF is sub-divided into trusts for each participating employer.

  3. The requirement that all employees/employers contribute money toward “Normal Cost” until the RHTCF is fully funded is removed, and the contribution basis is instead determined based on whether that particular employer’s sub-trust is fully funded.

Without this amendment, if say, the SFUSD’s trust was fully funded, but the City’s was underfunded by enough to make the RHTCF as a whole underfunded, SFUSD and its employees would continue contributing their ‘normal cost’ to the fund.

After the amendment, if the same circumstances occurred, SFUSD’s contribution rate would drop, but the City and its employees would still be expected to contribute normal cost.

This solves for a potential moral hazard (socialization of one employer’s under-funding liability among the participating employers), but increases the likelihood that the RHTCF will be underfunded as a whole.

  1. The City and the other employers are barred from making disbursements for health care costs from the RHTCF until their sub-trusts are Fully Funded in the opinion of the City’s actuaries.

  2. The City may disburse funds upon recommendation of the Controller, even if its RHTCF sub-trust is underfunded, if its retiree health care costs exceed 10% of its payroll costs.

  3. The City may disburse funds from its sub-trust according to any formula the Controller recommends, if the Mayor and two-thirds of the supervisors approve it. The Mayor and supervisors may not revise the formula – only accept or veto it.

  4. The other participating employers may disburse from their sub-trusts according to any formula they choose, if their governing bodies approve such a disbursal.

  5. The RHTCF Board makeup is codified to a set of specific officials, rather than being five people chosen by the supervisors.

Potential LP Positioning

I see the following rationales for either supporting or opposing the proposed measure:

Support:

  1. The city has under-funded its retiree health care costs by about $4.4 billion, according to current actuarial estimates. It currently pays these costs by raiding the general fund. The RHTCF will be nowhere near fully funded by 2020, when current charter allows it to be tapped. This raises the likelihood that the RHTCF will be perpetually underfunded.

  2. Current law causes the RHTCF to become an open spigot in 2020, by default. Participating Employers, including the city, can raid it at will, even if they have funded it poorly. Under the proposed measure, the Mayor/Supervisors or the leadership of the respective employer for non-city employers, must approve the use of RHTCF funds and those funds must be expended on retiree health care.

Oppose:

  1. The outright removal of the 2020 limitation, rather than supplementing it with the new rules, raises the possibility that the funds could actually be tapped before 2020.

  2. Salary and Wage costs in the 2013-2014 budget are $1.3 billion. If the city’s retiree health care costs exceed $130 million, all it takes is the Controller’s recommendation for the RHTCF to pop open like a bottle of champagne. Bear in mind, under current law, this cannot happen at all. According to the Chronicle, the City’s retirement costs will hit $151 million this year:

http://blog.sfgate.com/cityinsider/2013/05/21/proposed-ballot-measure-takes-on-retiree-health-care-liability/

That is beyond the theoretical cap under which the City could raid the trust fund, and will likely chew up some of the money the city and its employees are contributing for their own costs.

My Recommendation: Oppose, but engage with Supervisor Farrell (ASAP)

Supervisor Farrell seems genuinely interested in protecting the city’s balance sheet from retiree health care, and may be persuaded to withdraw the measure and try again. After all, we have until 2020 to get something on the books. I suspect the measure will pass if put before voters, as they’re unlikely to understand the nuance of the damage it might do.

The concept of a better funding model than “raid the general fund” for retiree health care is good. However, this proposed charter amendment appears deeply flawed. Supervisor Farrell seems to be banking on the city’s recent reforms to retiree health care (increased service and contribution requirements) to curve the city’s costs down over time. I’d argue that’s anything but certain.

In the meantime, the RHTCF should not be touched for current costs. Its expressed purpose was to be a savings vehicle for future costs, and it was only created five years ago. Barring a significant, unexpected escalation of costs, the city shouldn’t touch the fund until at least 2020, when it was permitted to do so under current law. The allowance for arbitrary disbursals is also troubling, though mitigated by the need to take politically unpopular steps to achieve it.

If we formally oppose this measure, we should note that Supervisor Farrell is welcome to propose a similar measure that:

  1. Retains or extends the 2020 hands-off date;
  2. Raises the limits for other-than-fully-funded disbursals;
  3. Some combination of the above

Regards,
Matt

Hi All! We did not discuss the ballot measures much yesterday, since I did not think they present much for the LPSF to oppose or support in this election cycle. This will be the first year in 3 years that we will not have an argument in the Voters Handbook. Please click on the link below and take a look at the measures. There are only 4 this time around–amazing for the statists in SF. They’re slipping!

Measures B & C considering the development on 8 Washington Street are from opposing sides of the development to either open or close the waterfront–we wouldn’t want to jump in the fray.

Measure D concerning prescription drug pricing for HIV drugs is a more interesting ballot measure. It requires SF government to enter into direct negotiation with drug manufacturers to lower the price of such drugs and to encourage state and national legislators to write legislation to reduce the prices by at least a third. As Libertarians I feel we should oppose such a measure because this is an area the government should stay out of, and we should not encourage more of the same kind of involvement that has led to the outrageous pricing in the first place. Not sure how they came up with the arbitrary one third, but just legislating lower prices is not going to work any better than price controls ever did in the 70’s. There were mixed feelings on this measure from the other core members, and I agree that opposing lower prices for HIV folks would not do anything to improve our image in SF, so I’m content to leave this one alone (and hopefully just oppose it on our website with a short statement of our reasoning along with the other ballot measures).

Measure A just popped up on the Department of Elections’ website a few days ago. Not sure how they can get away with filing it so late when the deadline for ballot measures is clearly stated as July 8, but nevertheless it’s there now and will be on the ballot. It’s called the Retiree Health Care Trust Fund. It’s not a clear cut issue to me. Part 1 calls for limiting disbursements from a trust fund for health care for city/county employees, which sounds good, but Part 2 allows for disbursements from the fund if health care costs exceed 10% of payroll costs, which sounds bad to me since health care costs are getting out of hand these days. Also the measure is a charter amendment proposed by Mark Farrell, probably the most fiscally conservative member of the Board, so that suggests the good intentions of the measure, if nothing else. At the dinner after the meeting yesterday, there was some discussion about this ballot measure that maybe we should oppose it. Please read this measure and advise your thoughts on it. There is still time to write a ballot argument and get it in by Thursday, August 15. I won’t be writing it because I’m conflicted on the measure, but if someone else has a good argument (and the majority of us agree), I will prepare the control sheets and we can go through the process again.

http://www.sfgov2.org/index.aspx?page=2969 (if this link doesn’t work, just go to the Department of Elections website, click on “Campaigns” on the left, and then “Local Ballot Measure Status” to get to the 4 measures.

Thanks!
Aubrey
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.

Thanks, Matt, for your very thorough research. I now oppose the measure. Using much of your language and sound arguments, I have just written an email to Mark Farrell asking him to change or drop his ballot measure (copied you and Marcy on the email). Let's see what happens. I doubt he will, so we should be prepared to write an argument against the measure if he declines. We'll still have Tuesday night and Wednesday night to do it and change a word here and there so we have lots of arguments to submit, as we always do for the "free" argument. A paid argument would be out of the question at this time, so it's the lottery or nothing at all. I would think only Terence Faulkner would submit an opposing argument, and I'm not even sure he would submit one, but better to submit lots of arguments to make it worth the effort.

By the way, if there is opposition to an argument against this measure, now would be the time to state it, since we don't want to start working on an argument tomorrow night and find out at the last minute that there is no consensus. I found the measure confusing and hairy, and only after Matt's analysis did I understand it better. Many thanks to Matt for resurrecting the issue when I was ready to throw in the towel on this one.

Thanks!
Aubrey

Hi Aubrey,

An argument based on Matt's analysis would be good. Let me know if I can help.

Yes, this is a hairy one. I think Farrell might be looking to an unprecedented onslaught of early retirements from City College (people retiring with lifetime healthcare, but no longer contributing to the pool), so best he came up with was separating the trusts, and requiring that each be funded separately. But the "emergency" clause is indeed somewhat of a low bar, rendering the whole trust vulnerable. That is just my take, and I did not read the proposal anywhere as carefully as I should.

Marcy

Interesting thought, Marcy.

One thing Farrell may have wanted to protect against is a bankruptcy filing by SFCCD under Chapter 9. California's "special districts" have historically been treated as distinct from their parent city or cities for bankruptcy purposes, so SFCCD could file for relief independently of the city as a whole.

The RHCTF Board is blocked by Charter from tapping the fund until 2020, but that wording would have no legal weight on a federal judge's prioritization decisions in a bankruptcy. To the extent that the RHCTF's assets are treated in Charter as a common asset of the contributing employers, those assets might be at risk in their entirety if SFCCD files for bankruptcy.

The sub-trusting Farrell proposes might avert that scenario. He's unlikely to tell us the real reason for his move if that's it.

- Matt

Yep, it would be unlikely that Farrell would let such a concern be known. A public expression of a "negative" thought like that would appear gauche for a City leader. But I do hope that somebody in City Hall is indeed thinking of what would happen if the college did lose its accreditation for good in July 2014, and everybody who could took early retirement with lifetime healthcare.

My conspiratorial mind is also wondering if the unions pressed for the proposal thinking that the low bar against dipping even if the funds were not fully funded would allow for withdrawals around July 2014.

Marcy

Yep, it would be unlikely that Farrell would let such a concern be known. A public expression of a "negative" thought like that would appear gauche for a City leader. But I do hope that somebody in City Hall is indeed thinking of what would happen if the college did lose its accreditation for good in July 2014, and everybody who could took early retirement with lifetime healthcare.

My conspiratorial mind is also wondering if the unions pressed for the proposal thinking that the low bar against dipping even if the funds were not fully funded would allow for withdrawals around July 2014.

Marcy

Under Farrell's sub-trusting proposal they will not get nearly as much, so their impatience would prove costly if they're the ones driving this. Once the contributions from CCSF are gone, there's simply no more money. Voters are unlikely to approve tax hikes for a defunct college to pay retirees' medical bills. If they do, we have much bigger problems than the retiree health care fund.

Under current law, the floodgates would swing open in a mere 6 1/2 years, and CCSF claimants could draw against the entire fund -- including contributions from the city and other employers. The more I think about this, the more this seems like a move to allow the District to slide into bankruptcy without its "retirees" being bailed out in grand fashion by city taxpayers.

The only troubling bit is, as you point out, the low bars to immediate draw-down across the board.

- Matt

Matt and all.

Your analysis on this is absolutely 24 Karet gold.

This is exactly what we need.

This kind of writing and thinking may be just what we need to get our camel nose in the credibility tent.

This does not come easily to a confirmed anarchocapitalist such as I.

But , if we published such an analysis it would actually be quite libertarian in the sense that like Mises, it shows a profound conviction that we cannot know what the results of certain policies when all the unintended consequences inevitably play out.

By demonstrating our concern for the risks of policies that may undermine the finances of the city, we show that libertarians may be just what is needed to keep the government from killing itself.

We can show a deeper concern for the true dependents of government by trying to rescue it from catastrophic failure ala Detroit.

the Detroitification of San francisco seems impossible now, but I suspect the same was thought of detroit in 1958, or Vallejo in 1997.

Terrific work Matt.

Of course we keep the Detroit stuff to ourselves.

Phil

Hi All! Well, I never heard back from Mark Farrell, and the response from the LPSF has been positive, so let's write ballot measure arguments against the Retiree Health Care Trust Fund. I would like to submit 25 or more arguments on Thursday morning at the Department of Elections (due at noon). I will write one myself tonight. Matt, you're the force behind this one, so I assume you will write one too. Marcy, you too? The more folks that write one, the better--that way our arguments really will be different, for a change.

As always, the limit is 300 words. Matt, you may not be familiar with the process on how we work this multiple submission of ballot arguments: once we get a good version we're happy with, we print it out and then proceed to change a word or two and then print that one out too. And so forth until we have multiple versions that are all essentially the same but slightly different. The more versions submitted, the more likely to be selected during the lottery at 2:00 PM that day. A separate control sheet must accompany each argument submitted. I have lots of copies of the control sheet from the last election cycle, so I can start filling them out tomorrow night/Thursday morning. As always, we should post our arguments to the Activist List for comments and improvements, but this all has to be finished up no later than Thursday morning (not late either--when they say noon at the Department of Elections, they mean it and the doors are locked
promptly at noon, whether you're done or not). I usually take my control sheets, scotch tape, scissors, and multiple pens down to the Department of Elections and finish up the process right in their office. Since we'll only be doing this for one ballot measure this time, rather than five last time, there should be less pandemonium than usual at the Department of Elections on Thursday morning.

One further note: all arguments submitted will be from the Libertarian Party of San Francisco--no personal names. There were a few bruised feelings during the last go-round when personal names accompanied the LPSF name, so let's avoid that by keeping it simple and hassle-free. Also an extra sheet has to accompany the control sheet when a personal name is used, and I don't feel like filling out extra sheets this time.

Lastly since this measure is an unusual one and not the usual type we automatically oppose (new taxes, new fees, bonds, etc.), and because the measure truly seems well-intentioned by Supervisor Farrell, and because we have a lousy image in SF, it wouldn't hurt to include a few nice conciliatory words toward the PRO-side of the argument.

Thanks!
Aubrey
P.S. I hope you guys made your anti-SB1 calls (I did).

Hi Aubrey,

I decided to sit this one out. Most appreciative to you and Matt!!!

Marcy