VOTERS TROUNCE PROPOSITION B! AN ADACHI COMEBACK?
Q. Mike, as a Tier II (New Police Plan) member, I was elated to see Proposition B (the Jeff Adachi initiative petition) soundly defeated. Is it likely that Adachi will try again in 2011?
A. Public Defender Jeff Adachi is telling the press that he will be back again in 2011 with a re-do of his initiative petition (Proposition B) that was soundly trounced by SF voters: NO 57.6%; YES 42.4%. He is telling anyone who will listen to him that he will tweak the measure and try again because he opines “that city employee pension and health plans are bankrupting the city.”
This was a costly battle: the coalition of city employee organizations/unions spent $1.4 million, while the Adachi forces spent about $1.0 million.
To be thanked and congratulated for their special efforts in defeating Proposition B are the steering committee members of Standing Up For Working Families. These include attorney Sean Connelly, Municipal Attorneys’ Assn, Gary Delagnes, POA president, Bob Muscat, Local 21, Tom O’Connor, Firefighters’ president, Rebecca Rhine, Municipal Executives Assn, and Patty Tamura, SEIU. These six along with political consultant Jim Sterns and media consultant Nathan Ballard formed an effective working coalition that included all active and retired city employee organizations. Special thanks to POA president Gary Delagnes who publicly debated Jeff Adachi several dozen times. Special thanks also to all those active and retired City employees who distributed campaign literature through the City’s neighborhoods.
Where did Adachi get his financial backing? His chief money man was Michael Moritz – a billionaire Pacific Heights resident. Mr. Moritz was born in Cardiff, Wales, educated at Oxford and the Wharton School at the University of Pennsylvania. Moritz, a former journalist for Time magazine, made his fortune with his company – Sequoia Capital, founded in 1986 in Silicon Valley. This is a venture capital firm that was an early investor in Google when it was a private company; his $25 million investment in 1999 grew to $2 billion in 2004 when Google was offered as an IPO. He has had similar success with Yahoo, Cisco, Apple, and Pay Pal. Other significant contributors to the Yes on B campaign included: Eric Schmidt ($75,000), co-founder of Google, William Hume ($50,000), chairman of Basic American Food, George Hume ($25,000) investor in Basic American Food, and John Osterweis ($25,000) president of Osterweis Capital Management.
The only political support that Adachi received was from former San Francisco Mayor Willie Brown. What was he thinking? He spent an entire political career of over 30 years working with, supporting, and being supported by public employee groups. Then he decided to support Proposition B – with no other federal/state/local politician joining him. We truly hope he has reconsidered his alliance with Jeff Adachi.
Public employee groups are already busy formulating their own plan on pension and health care benefits. And such a plan will indeed be needed since a City budget deficit of at least $400 million is looming just around the corner.
BENEFITS TO SURVIVING SPOUSE
Q. Mike, I am lucky to be in the Tier 1 safety plan. I would like to assure my wife that she will be financially okay if I were to die first?
A. Thanks to your decision to enter into and complete a career as a San Francisco police officer, your wife will be financially secure. You mentioned that you were a member of the Widow’s and Orphan’s Association which currently pays a death benefit of $17,000 upon receipt of a death certificate. Make sure that she is currently listed as your beneficiary (415-681-3660). As a Tier I service retiree, your wife will receive a 75% spousal carryover that she will continue to receive for the rest of her life unless she remarries, in which case this monthly benefit would terminate. All cost of living adjustments will also apply to her monthly benefit. The POA insurance for its retired members who pay for it is a term life benefit of $5,000 up to age 64. Your wife will also remain in the Health Service System with most of the premium paid by the City.
THE FEDERAL DEFICIT COMMISSION
Q. Mike, President Obama’s federal deficit commission recently proposed curbs on social security, deep reductions in federal spending and higher taxes, and a gradual elimination in the current tax deduction that homeowners receive for interest they pay on mortgages. I am really concerned about this proposal especially as it applies to higher taxes and lower social security benefits. What will happen here?
A. The document of which you speak was just released by Democrat Erskine Bowles, a former Clinton White House chief of staff, and Republican Alan Simpson, a former senator from Wyoming. This is an incendiary proposal still requires review and voting by the full 18 members of the commission.
Social Security and Medicare spending would be curtailed. The plan was designed to cut total US government deficits by as much as $4 trillion over the next decade. The plan would gradually increase the retirement age for full social security benefits to age 68 by 2050 and to age 69 by 2075. (The full retirement age for those now retiring is 66 and for those born in 1960 and after, the full retirement age is now 67.) Current recipients would receive smaller-than-anticipated annual increases. The amount of income subject to social security taxes would be increased.
For every $1 of new revenue (taxes), the plan demands $3 in spending cuts. The proposal would leave Obama’s new health care overhaul in place, while greatly strengthening its cost control provisions, including a board with the power to make cuts in Medicare payments to providers. For most Americans with job-based health coverage, the biggest change would be to limit or eliminate altogether the tax-free status of employer-provided health benefits. To deal with the rising costs of Medicare and Medicaid, the giant health care programs for seniors and low-income people, the proposal calls for limiting annual spending increases to no more than 1 percent above the growth rate of the economy.
The plan calls for a three-year freeze in the pay of most federal employees and a 10% reduction in the federal work force. For individuals and families, the proposal would eliminate a host of popular tax credits and deductions, including the child tax credit and the mortgage interest deduction. But income tax rates would be reduced – the top rate would drop from 35% to 23%.
Even with the dramatic proposals, the Bowles-Simpson plan would leave deficits of about $380 billion in 2015 – the year by which President Obama tasked the group with balancing the federal budget, except for interest payments on the national debt that now stands at $13.7 trillion.
The Social Security proposals came under heavy fire. Nearly 54 million retirees, disabled workers, surviving spouses and children now get social security monthly checks. Payments for retired workers average $1,020 a month; disability benefits average $929 a month. In 75 years, 122 million people, or one-forth of the US population, will be drawing benefits according to the system’s demographers. But on its current path, social security is projected to be unable to fully meet its obligations by 2037, largely because of aging baby boomers reaching retirement.
With the US federal deficit at $140.4 billion for this October and $1.29 trillion for the past fiscal year, second highest on record, and this current fiscal year headed for the third straight total above $1 trillion, it appears obvious that deep reductions in federal spending and higher taxes for millions of Americans are on the way. But when? This will be a battle royale- with Democrats pushing increased taxes and Republicans calling for reduced spending.
I believe that ultimately the age for receipt of full social security benefits will be raised on your children and grand-children. The powerful senior lobby (AARP) will probably forestall a change in the social security cola formula for a long time into the future. The mortgage interest deduction, currently limited to $1 million, will be gradually reduced, but will protect the middle class’ access to this deduction. Spending cuts will undoubtedly occur including a reduction in the federal work-force and congressional pet projects (earmarks) will be severely restricted. I foresee a major overhaul of both the individual income tax and the corporate tax systems with the goal of lowering overall tax rates, simplifying the tax code and broadening the taxpayer base. Stayed tuned; the debate is about to occur.
Mike Hebel has been the POA’s Welfare Officer since January 1974. He is an attorney and a certified financial planner. He has received awards/recognition as a Northern California “super lawyer” and included amongst “America’s top financial planners.” He represents POA members at the City’s Retirement Board and at the Workers’ Compensation Appeals Board. He also advises on investment matters pertaining to the City’s deferred compensation plan. He is currently the chair-person on the SF Police Credit Union’s Supervisory Committee. Mike served with the PAL as president and long-term Board member. Mike retired from the SFPD in 1994 after a distinguished 28 year career. He is a frequent and long-time contributor to the POA Journal. If you have a question for Mike, send an e-mail to mike@sfpoa.org or call him at 861-0211.
