Sunday, February 27, 2011

The party's almost over

Recall how the Great Recession caused the current budget crisis here and around the country. From last year's Grand Jury report (Pension Tsunami: The Billion Dollar Bubble) on the pension crisis in SF:

The 2008 economic crisis caused a decline in the City’s pension fund of approximately $3 billion or 25% of the fund balance as of June 30, 2009. While employee contributions to the pension fund have remained constant at 7.5% of wages, the City’s contributions rate has increased rapidly. The City’s rate was 0% until 2004, will be 13.56% next year (FY 2010-2011)...The City and County of San Francisco has a current annual pension liability of $287 million for FY 2009-10. A combination of too high estimates on investment returns, and too low annual employee contributions may lead to a billion-dollar pension crisis in San Francisco within five years.

Okay, so the Great Recession is what caused the current budget crisis that Mayor Lee, Warren Hellman, the public employee unions, et al are now trying to solve even as Public Defender Jeff Adachi is gathering signatures for another ballot measure to address the problem if those negotiations fail to come up with a plausible solution.

What about the political context that led to the unsustainable pension and benefits City Hall gave to union members? David Brooks explains how the system works differently in the public and private sectors:

Public sector unions and private sector unions are very different creatures. Private sector unions push against the interests of shareholders and management; public sector unions push against the interests of taxpayers. Private sector union members know that their employers could go out of business, so they have an incentive to mitigate their demands; public sector union members work for state monopolies and have no such interest. Private sector unions confront managers who have an incentive to push back against their demands. Public sector unions face managers who have an incentive to give into them for the sake of their own survival. Most important, public sector unions help choose those they negotiate with. Through gigantic campaign contributions and overall clout, they have enormous influence over who gets elected to bargain with them, especially in state and local races.

Until the housing bubble burst and the Great Recession hit in 2008, it was a win-win deal for everyone: public employees got great benefits, union leaders served their memberships, and the mayor and the supervisors got union political support when they ran for reelection. But the thing about bubbles is they always burst sooner or later.

Is it any wonder that there still isn't a real San Francisco progressive in the mayor's race? How would they explain giving away the store to the unions? Come to think of it, how does former supervisor and candidate Bevan Dufty, though not a progressive, explain it, since he was a supervisor when the bubble was inflating? And how about City Attorney Dennis Herrera? Why didn't he step forward earlier like Adachi to protect the city's taxpayers?

Interesting that, when you look at the websites of the candidates for mayor, you see nothing but veiled references to the currrent crisis. No one wants to get too far out front on the issue for fear of offending the unions. But they better start worrying about offending city taxpayers, who rejected Adachi's ballot measure last year but may be running out of patience this year, especially with the issue of union benefits in the national headlines every day.

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