Daniel Lurie has a well-rehearsed patter about making it easier to do business in a city festooned with red tape. Just last week, San Francisco\u2019s can-do mayor regaled an audience at a gala for SPUR, the good-government think tank largely aligned with his reform efforts, with a story about how he rallies his troops.\u00a0<\/p>\n
\u201cI tell my team all the time: Get close to the problem,\u201d he said. \u201cTalk to the person trying to open the restaurant. Talk to the builder waiting on a permit. Talk to the business owner worried about what is happening outside their front door. Listen to what is getting in their way. Then fix it.\u201d<\/p>\n
It would seem a no-brainer, then, that Lurie\u2019s fix-it crew would be all over the shortcomings of a program that infuriates small businesses, particularly restaurants: the 20-year-old SF City Option, which requires employers to pay into a fund for workers\u2019 medical expenses \u2014 and which far too few employees bother using. As The Standard has extensively reported<\/a>, these health reimbursements are so underused that the city recently transferred $201 million from dormant health savings accounts into its own coffers.\u00a0<\/p>\n That\u2019s money the city forced employers to cough up that employees largely did not use \u2014 either because they didn\u2019t know it was there or because it was too onerous to access \u2014 and that the mayor can now spend any way he pleases.<\/p>\n Many business owners hate this program<\/a> not because they\u2019re stingy and don\u2019t want to be on the hook for employee health benefits. They hate it because it costs a fortune to administer, it\u2019s convoluted for workers to access, and it appears to gild the city\u2019s budget<\/a> at the expense of already stretched small businesses. This is why you\u2019ve seen so many \u201cHealthy SF\u201d surcharges on restaurant bills over the years: They are restaurateurs\u2019 passive-aggressive way of reminding customers that everyone suffers from heavy-handed city policies.\u00a0\u00a0<\/p>\n Yet after months of on-again-off-again efforts to address this pernicious problem, Lurie\u2019s team is no closer to fixing it than when he took office. In fact, I\u2019m told, talks broke down altogether in the spring among representatives for restaurant owners, business advocates, organized labor, and the mayor\u2019s office. The parties have not convened a meeting since, leaving participants unsure what, if anything, Lurie\u2019s negotiators intend to do next.<\/p>\n \u201cIt is true that we have not yet arrived at a final reform plan,\u201d Laurie Thomas, executive director of the Golden Gate Restaurant Association, said when I asked her where things stood on efforts that began in February 2025. I wondered what the hangup was. \u201cI honestly am not sure,\u201d she replied.<\/p>\n I have a pretty good idea.<\/p>\n Lurie\u2019s inability to fix this problem is consistent with his unwillingness to take on labor unions. Despite ongoing budget deficits<\/a> and a bloated city government, Lurie let labor talk him out of big layoffs over the past two budget cycles and promised not to downsize in the near future, while guaranteeing pay raises<\/a>. The SF City Option, part of a law known as the Health Care Security Ordinance, is a brainchild of organized labor. Conceived in 2006, in an era before the Affordable Care Act, it sought to require employers who didn\u2019t provide employee health insurance to pay into a fund that would set up city-administered accounts to support workers.<\/p>\n Despite health insurance now being widely available under Covered California, San Francisco\u2019s dominant labor unions want to tweak, not eliminate, the program they have championed for so long. \u201cWe are very open to modifications,\u201d said Mike Casey, president of the San Francisco Labor Council. \u201cWe think the way it\u2019s currently structured needs amendment.\u201d\u00a0<\/p>\n Casey insists that unlike other negotiations with the city he has been involved with, this one is not acrimonious. \u201cWe want to look at real reform here and see if we can create a system that everyone can use and that the money is not placed into this surplus fund.\u201d<\/p>\n \u00a0***\u00a0<\/p>\n No one disputes that the nearly 20-year-old program (it took effect in 2008) has not worked as originally planned. Three years ago, the city announced it was beginning a process known as escheatment, a bureaucratically sinister word for the government\u2019s appropriation of unclaimed property. Unless steps were taken to distribute funds to the employees entitled to them, more than $500 million then in inactive worker accounts would become the city\u2019s by 2026. Embarrassed by the sheer amount of money flowing to unintended uses, the Department of Public Health, which oversees the accounts, mounted a lengthy publicity campaign to locate workers and inform them of the cash at their disposal.<\/p>\n The outreach campaign whittled down the stash by $300 million, with workers racing to use their unspent funds (opens in new tab)<\/a>on everything from long-delayed medical treatments and smart watches (with a letter of medical necessity) to contact lenses and \u2014 in the case of my colleague Sara Deseran<\/a>, a former restaurant employee \u2014 physical therapy sessions. But the system\u2019s critics see that process as flawed. Workers must pay upfront for medical or medical-adjacent expenses, then seek reimbursement from the city. The program seems to benefit those who are most adept at gaming the system, said Sharky Laguana, a former president of the Small Business Commission and a participant in the now-dormant talks with the mayor\u2019s office.<\/p>\n Laguana has a proposal: He wants the city to create a \u201cclaim-activated\u201d funding mechanism. Instead of paying into funds that may never be used, employers would pay medical expenses after employees have filed claims to the city. \u201cThis way an employer would be invoiced only on something that already has happened,\u201d he says.<\/p>\n Laguana is unmoved by the fact that, after a significant marketing and mobilization effort, the city was able to boost utilization rates on the reimbursement accounts from 34% before 2023 to around 80% more recently. \u201cThat still leaves another 20% to be escheated at a future date,\u201d he said. \u201cI want it scrapped in favor of something that works better.\u201d<\/p>\n A hopeful sign is that Casey, the labor leader, praised Laguana\u2019s problem-solving efforts and agreed that a solution needs to focus on providing healthcare and health insurance to workers. He recognizes the flaws in the city\u2019s reimbursement accounts. \u201cUntil we get a single-payer healthcare system in the country, we\u2019re doing a patchwork approach that is the next best thing,\u201d he said.<\/p>\n (Casey sounded as if he fell out of his chair when I told him over the phone that I agreed with him about the need for a government-funded single-payer plan; where we disagree is the likelihood of us having one any time soon.)<\/p>\n The Department of Public Health did not provide the amount of money that remains in the fund, inactive or otherwise, and the city has not begun another three-year process to claw back unclaimed money. The $201 million the city grabbed in May went into a reserve fund meant to make up lost federal and state funding. Reserves like these are how San Francisco mayors have long balanced the city\u2019s budget.<\/p>\n And while some in leadership undoubtedly like the idea of backfilling the budget with manna-from-heaven-like cash, they are actually playing with fire by claiming workers\u2019 funds as the city\u2019s own. The payments from employers are considered fees. Yet money that gets used for a purpose other than that for which it was expressly intended \u2014 in this case, paying for workers\u2019 healthcare expenses \u2014 can be considered an illegal tax because it wasn\u2019t approved by voters. A smart class-action attorney could sue on behalf of aggrieved businesses, leaving the city open to legal liability.\u00a0<\/p>\n What the mayor\u2019s office thinks about this is unclear. Aly Bonde was spearheading the dialogue before May, when Lurie promoted her to succeed Staci Slaughter as chief of staff. The mayor\u2019s office declined to make Bonde available for an interview and issued a statement:<\/p>\n \u201cMayor Lurie has been a champion for small businesses, and we are constantly looking for more ways to support them. And as the cost of living rises, we\u2019re working to make sure San Franciscans can access health care and critical services. We\u2019ve been working with businesses and labor for months to try to find consensus on how best to achieve those goals, and we\u2019re going to keep at it.\u201d<\/p>\n My prediction: After the midterms, and after a sufficient majority of the city\u2019s public-sector labor unions accept the contract deal Lurie offered them in September, the mayor\u2019s team will find a solution that mollifies small businesses. Maybe that will entail exempting some of them from the health-expenses mandate. Hopefully, they come up with a mechanism that more efficiently funnels money into workers\u2019 pockets.<\/p>\n Either way, it\u2019s a problem Lurie himself needs to get close to and fix.<\/p>\n","protected":false},"excerpt":{"rendered":"Daniel Lurie has a well-rehearsed patter about making it easier to do business in a city festooned with…\n","protected":false},"author":2,"featured_media":509551,"comment_status":"","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[30],"tags":[69448,4752,636,101,103,102,104,106,105,37511,12551],"class_list":["post-509550","post","type-post","status-publish","format-standard","has-post-thumbnail","category-san-francisco","tag-bureaucracy","tag-city-hall","tag-daniel-lurie","tag-san-francisco","tag-san-francisco-headlines","tag-san-francisco-news","tag-sf","tag-sf-headlines","tag-sf-news","tag-sf-reality-check","tag-the-lash"],"_links":{"self":[{"href":"https:\/\/www.newsbeep.com\/us-ca\/wp-json\/wp\/v2\/posts\/509550","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.newsbeep.com\/us-ca\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.newsbeep.com\/us-ca\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/us-ca\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/us-ca\/wp-json\/wp\/v2\/comments?post=509550"}],"version-history":[{"count":0,"href":"https:\/\/www.newsbeep.com\/us-ca\/wp-json\/wp\/v2\/posts\/509550\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/us-ca\/wp-json\/wp\/v2\/media\/509551"}],"wp:attachment":[{"href":"https:\/\/www.newsbeep.com\/us-ca\/wp-json\/wp\/v2\/media?parent=509550"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.newsbeep.com\/us-ca\/wp-json\/wp\/v2\/categories?post=509550"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.newsbeep.com\/us-ca\/wp-json\/wp\/v2\/tags?post=509550"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}