San Jose’s Long and Winding Road to Pension Reform Takes Another Turn

The San Jose City Council, poised to vote on pension reform years after the experiment began.

The San Jose City Council, poised to vote on pension reform years after the experiment began. (Beth Willon/KQED)

Pension reform’s sometimes tortuous grip on San Jose loosened Tuesday when the City Council passed a new agreement with police and firefighter unions on retirement benefits and wages.

The agreement is a watered-down version of Measure B , the pension reform ballot measure that San Jose voters overwhelmingly passed in 2012. It gave less generous retirement benefits to new employees and forced existing workers to either reduce benefits or pay more to keep them.

The new plan scales back what employees must contribute for retirement, offers a cheaper health care plan for new and existing employees, gives police officers an 8 percent raise plus a one-time retention bonus, and reinstates the police and fire retirement plan’s earlier definition of disability.

“We needed to find a Goldilocks solution,” said Mayor Sam Liccardo, who had backed Measure B. “We needed a set of benefits that can make us a competitive employer and still insure that we had a financially sustainable system.”

Now a  judge will have to invalidate parts of Measure B and insert the changes before it goes back to San Jose voters in November 2016.

Few cities in California have had more upheaval and fractures within the community over voter-approved pension reform than San Jose has. There were three years of bitter legal battles with police and firefighters, who felt Measure B was a frontal assault on the benefits they earned, and they took the measure to court.

Cities around the state have been keeping a close eye on the fallout from Measure  B.

“This was, in a sense, the experiment,” said Josh Rauh, a pension reform scholar at Stanford University’s Graduate School of Business. “There had been no city that had up until now in California tried to change pension benefits for existing employees.”

Measure B came about as cities like Stockton and San Bernardino were on the verge of bankruptcy, partially caused by crushing retirement payments that came due as the economy was tanking.

Ex-Mayor’s Bold Move

Former San Jose Mayor Chuck Reed took Measure B pension reform to the ballot in 2012, saying he couldn’t cut city services and staff any further.

Former San Jose Mayor Chuck Reed reads an editorial about his 2016 statewide pension reform ballot measure.
Chuck Reed, former San Jose mayor, reads an editorial about his 2016 statewide pension reform ballot measure. (Beth Willon/KQED)

“Even though it’s painful to take these matters on directly, the costs of doing nothing were enormous because we were cutting services to our people every year to pay for these skyrocketing costs,” said Reed.

Rauh said many politicians take a piecemeal approach to pension reform or dabble around the edges of benefits for new employees, fearing blowback from public employee unions. Reed, he said, acted boldly.

“Mayor Reed was at a point in his career where his political aspirations beyond his time in office were fairly limited, and he also had a very strong view that pensions in the state of California are unsustainable they way they are budgeted and the way they are measured,” said Rauh.

Reed agrees that most politicians have a lot to lose by taking on public employee unions.

“I knew in the Democratic Party — and I’m a Democrat — that if you crossed the public employees unions, you probably don’t have a future in the party,” said Reed.

Meanwhile, San Jose police officers left for jobs in surrounding cities where the pension benefits and pay were better. Tom Saggau, a spokesman for the San Jose Police Officers’ Association, said the Police Department had already lost officers because of budget layoffs. Then it was hit by pension reform.

“We were already losing officers,” said Saggau. “What Measure B did was accelerate it.”

This year the new crop of city leaders, including Liccardo and the new POA president, were able to sit down and negotiate a revised pension reform plan. A good part of the work had already been accomplished in court in 2013, when a judge ruled the city could not require existing employees to contribute more to their pensions.

Rauh said what happened in San Jose shows that cities can’t succeed in reining in pension costs by working alone.

“Cities need to band together and get behind those who are proposing statewide ballot initiatives to make this issue something that is in voters’ hands,” he said.

Reed and former San Diego City Councilman Carl DeMaio are now pushing a 2016 statewide pension reform ballot measure. It would require local voter approval of any future increases in public employee pensions.

Reed’s signature Measure B has been weakened but he remains determined.

“When you go on the path of pension reform, you have to realize it’s going to be long and difficult,” said Reed.

The public employee unions are now gearing up to fight the statewide measure.

San Jose’s Long and Winding Road to Pension Reform Takes Another Turn 26 August,2015Beth Willon

  • Robert Thomas

    Municipalities and states have placated electorates by offering more services than they could afford through future-loading costs. Pension plans have abetted this. It’s inevitable that in the process of extracting themselves from these agreements, public entities will have to pay more up front for the same services. That is well.

    With respect to assertions made in the lead… I’m a native of San Jose. Since the end of WWII, San Jose has prospered and occasionally – reluctantly – surged. There has never during this era been any “bust”.

    “Boom” and “Bust” are features of extractive resource economies, military expenditure dependent economies, P.R. hyper inflated, fad generated economies and tourist traps.

    San Francisco know-nothing journalists yimmer-yammer as they please, oblivious to the facts of the world.

  • cnccnc

    Chuck Reed is a Tea Party Republican. I mean, it’s right in the article. He went after the pensions of cops and firefighters and won, such that they have to sue and renegotiate the earned benefits that Reed’s administration and the voters took from them. He’s continuing to try to take away the earned benefits of other public employees.

    It’s not about big, scary, entitled unions. It’s about taking benefits that people earned by being shot at and running into fires, among other things.

    Now, there’s nothing wrong with being a Tea Party Republican. Scott Walker is proud to have wrecked public employee unions and damaged the middle class in his state. He sees it as a tax issue. That’s fine. But Chuck Reed should be honest about who he is and what his motives are.

  • Bampster

    Wow! 8 % raises and the unfunded liability to the taxpayers just keeps on growing!
    Looks like the union gave sufficient donations to continue their taxpayer funded generous benefits!

  • surfcheck

    Good job Chuck Reed. He exposed the public safety costs as an extraordinary cost in every cities budget. And that we have to address it. In today’s world we need the public safety personnel more than ever.

    An obvious solution to the pension liabilities is all new hires have their actuarialized pension payment computed and paid by the employeer to the pension along with paycheck. Just like my 401k deposits.. No, the officer doesn’t cost $80K, it is $120K. And our kids won’t have to pay for our era’s safety costs.

  • Jennifer H

    Measure B came about as cities like Stockton and San Bernardino were on the verge of bankruptcy, partially caused by crushing retirement payments that came due as the economy was tanking. I find this statement inaccurate, Stockton took out loans to do major redeveloment in downtown and the port area it was not due to their retirees. but a gambling bet tht the could pay it back. San Bernardino, had a similar situation again a gambling bet the city manger and council lost. Now they are contracting out their fire and having the county cover. This was the goal to begin with bust the unions and get out of paying their retirees to balance their budgets. Alll the county CEA’s remain as did their pay packages all the workers took a bath. Also ther is the litle matter of not paying a contractor and loosing the court case. Again to not pay a worker.

  • Jennifer H

    To all of you in a 401K plan, How’s that working out for you after the repeated “corrections”? Wouldn’t you also want your social security in a 401K?
    It is time for every Californian to have a defined benefit that they and their employer contribute to and travels with the employee from lay off to layoff. We have the law but it is still being studied to death.
    Thank you capitalist, religious, republicans for all the uncertainty in our working lives and retirement. How do you sleep at night knowing you screwed your workers today?


Beth Willon

Beth Willon is a senior reporter for KQED’s Silicon Valley News Desk in San Jose. (@KQEDNews )

We cover more than technology from San Jose to the Peninsula.


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