Retiree Health Care to Cost San Francisco $4.4 Billion, City Sets Aside $9.7 Million to Cover Costs

Retiree Health Care to Cost San Francisco $4.4 Billion, City Sets Aside $9.7 Million to Cover Costs<>

Posted: 17 Dec 2010 12:02 PM PST
Unfunded health care liabilities are mounting in nearly every city in the nation. In some of the larger cities, the difference between funding and liabilities is staggering. For example, take San Francisco where Retiree Care to Cost City $4.4 Billion<>
After months of delays, the San Francisco controller's office announced Thursday that it expected the city to pay $4.4 billion to provide municipal retirees and their dependents with lifetime health benefits. The city has set aside $9.7 million to cover the costs.

In an interview, Benjamin Rosenfield, the city's controller, said that the situation would be worse if the city had not enacted changes that went into effect last year. New city employees must pay 2 percent of their salary into a health care trust fund. Requirements to receive lifetime coverage were also tightened.

But Mr. Rosenfield said tens of thousands of employees are still entitled to lifetime coverage, and they pay nothing into the fund.

To put the $4.4 billion liability in perspective, San Francisco has borrowed $2.6 billion through general obligation bonds in its entire history.

All city employees hired before 2009 were promised lifetime health care after five years of work. The coverage includes all dependents, and it does not matter how long before retirement the employee stopped working for the city.

In November 2009, the United States Government Accountability Office studied retiree health care liabilities of the 39 largest local governments. San Francisco's then-$4 billion tab ranked No. 6 on the list, behind larger cities like New York and Los Angeles.
Preposterous Deals Explained

Why citizens of San Francisco keep electing officials who agree to these preposterous deals is at first glance incomprehensible. Yet, the situation is easily explained.

The union is in bed with city politicians, and via campaigns of fear mongering, coercion, and massive union-funded ad campaigns, unthinking voters keep returning corrupt politicians to city hall.

Outrageous City Response to Crisis

Just look at that outrageous city response to the crisis. Going forward, new city employees must pay 2 percent of their salary into a health care trust fund. That is a smashing kick in the teeth of city taxpayers by those running the city into the ground.

The city would have massive applications for jobs even if the employees had to pick up at 100%.

Judging from the health-care deficiency alone, not even counting unfunded pension liabilities, it is safe to assume San Francisco is bankrupt.

Look at Rosenfield's statement: If the city is unable to set aside large sums to address the growing liability, Mr. Rosenfield said, one viable solution would be that "over time and through collective bargaining" current city employees contribute more.

With that statement, it is easy to see Rosenfield is totally incompetent, and unfit for public office. For starters what's with the "IF the city is unable" nonsense? There is no "IF" about this: The city clearly does not have $4.4 billion, nor does it have any viable means of getting $4.4 billion.

Moreover, and worse yet, collective bargaining is itself one of the problems. The problem and the solution cannot be the same. Thus, anyone who thinks collective bargaining with public unions "over time" is a viable solution is either in bed with union leaders or a complete fool. I suspect both.

Mike "Mish" Shedlock
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Mike "Mish" Shedlock is a registered investment advisor representative for SitkaPacific Capital Management. Sitka Pacific is an asset management firm whose goal is strong performance and low volatility, regardless of market direction. Visit to learn more about wealth management and capital preservation strategies of Sitka Pacific.


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