Local 21 and PEC Stand Up for Pension Integrity

On Wednesday, December 9, at the start of their meeting, the San Francisco Retirement Board removed the controversial Down Payment Assistance Loan Program (DALP) from their agenda.  DALP is a Mayor’s Office of Housing program. They are proposing to sell the loan portfolio to the Retirement Board, claiming it is a good, safe investment for the Pension Board and, at the same time, will assist the Mayor’s office to fund additional mortgages in response to the housing crisis in San Francisco.  Almost every one of the largest City employee unions represented by the Public Employee Committee, including Local 21, lined up at the meeting to speak out in opposition to the proposal.  

Local 21 leaders are very sensitive to the housing challenge; we realize that city employees are impacted by it as well, and we care about preserving our unique San Francisco culture.  Many City employees are being forced out of San Francisco.  

And we are not opposed to innovation.  To the contrary, we fully support forward-thinking efforts to join complementary agendas, given that appropriate safeguards are met.  However, the DALP proposal has not been through the same review process that Retirement staff and consultants typically use to scrutinize other investment opportunities.  While the Mayor’s Office of Housing stands behind the program as a good investment opportunity for the Retirement System, their expertise is housing, not pension fund investment.  Moreover, the push from the Mayor’s office is taking on a political air, which we find particularly disturbing.  Insiders say Retirement Board Member Victor Makras, a mayoral appointee, was the person pushing hardest for an up-or-down vote on the DALP program.  Given Makras’ work in Bay Area real estate development, people are beginning to wonder why he is pushing for DALP,  speculating on the possibility of a conflict of interest.

In 2010, during the deepest part of the recession, the SFERS lost billions of dollars. Pension “reform” warriors here in San Francisco and throughout the country were predicting doom and gloom beyond the factual depth of the problem to support drastic cuts to public employee pensions, and in some cases, the complete elimination of any defined benefit guarantees.  SF City Public Defender Jeff Adachi developed and sponsored Prop B, one such ballot measure that all of labor joined together to defeat.  In response, we helped develop a second ballot measure, Prop C, that made changes – reducing benefits for new employees and increasing contributions from all employees and the City  – to be responsive to the real, factual problems caused by the downturn.  All Local 21 members, along with all other City employees and the City itself, ended up paying more for their pensions. We were willing to do so because it was necessary to strengthen and preserve our pension program.  The new contribution rates “float” and the hope was that the increased rates would eventually return closer to the pre-recession rates as the economy improved, adding income back for our members.   

The challenge for all us given the “float” structure is to be diligent about monitoring the Retirement Board and standing up strongly for the integrity of all investment choices so they are socially responsible and maximize returns.