SJ's Plan to Rein in Retirement

Wednesday, May 25, 2011  |  Updated 11:54 AM PDT
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The San Jose City Council moved forward with an  analysis of a proposal from Mayor Chuck Reed to rein in retirement costs, amid vehement opposition from city employees and state representatives.

The San Jose City Council moved forward with an analysis of a proposal from Mayor Chuck Reed to rein in retirement costs, amid vehement opposition from city employees and state representatives.

The San Jose City Council voted Tuesday to move forward with an analysis of a proposal from Mayor Chuck Reed to rein in retirement costs, amid vehement opposition from city employees and state representatives.

Read Prop Zero Blog that makes the case against the plan.
   
The council voted 8-3 to move forward with a study of Reed's proposal, which was also supported by Vice Mayor Madison Nguyen, Councilman Sam Liccardo and Councilwoman Rose Herrera.
   
The dissenters were Councilmen Xavier Campos, Kansen Chu and Ash Kalra, who said he supports pension reform as long as it is legal.
   
"We're putting forward a proposal that will end in a real fiscal disaster," he said.
   
Reed announced the proposal last week, saying that it would help the city avoid further cuts to services and the loss of hundreds of jobs.
   
Reed has said retirement costs are "skyrocketing" and contributing to the city's $115 million budget deficit, which will likely force the city  to lay off hundreds of workers, including 195 sworn police positions and 64 firefighter positions as well as reduce library service to three days a week.
   
Retirement costs are projected to rise to $400 million by 2016, and could be closer to $650 million after actuarial adjustments.
   
"We have to act now," Reed said at the council meeting today. "The  cost of not acting will be a thousand times worse."
   
Among the nearly 70 people who addressed the council directly to voice their concerns was Wisconsin state Sen. Spencer Coggs, one of 14 Democratic senators who left the state to protest Republican Gov. Scott  Walker's proposal to end collective bargaining for workers.
   
Opponents of the proposal were out in droves at the council meeting today, waving signs that read "Shame" and wearing stickers that said  "No Wisconsin Politics."
   
Resident Fred Hirsch expressed his disappointment with the council.
   
"I've heard the words 'immoral,' 'unjust,' ... and 'Wisconsin,' which reverberates in this room," Hirsch said. "Any of you who I have supported who vote for this thing are betraying the working people of San  Jose ... and it's a shame."
   
City workers and retirees are not the only ones who are taking a  stand against the proposal. Today Democratic state Assemblymen Paul Fong,  Rich Gordon, Bob Wieckowski and Luis Alejo sent a letter to state Attorney  General Kamala Harris asking her to investigate the city's declaration of a fiscal and public safety emergency as unwarranted and a misuse of state law.
   
Reed said his proposal is not the only solution to the fiscal problem and that the council is open to working with employees to find alternative solutions.
   
The proposal directs city staff to meet with unions and begin  exploring changes to the charter by June 21. On that date, the council is expected to adopt the final budget.
   
Reed's proposal calls for setting limits on retirement benefits for new employees, current employees and retirees.
   
The limits include capping the city's contribution to retirement benefits for new employees at 9 percent of base salary and 50 percent of the total cost.
   
Another limit would be to raise the age at which employees can receive full retirement benefits to 60 for sworn public safety employees and  65 for all other employees.
   
Reed proposed raising the eligibility for retiree health care  benefits to 20 years of service, and limiting the pension accrual rate for current employees to 1.5 percent per year for any future years of service.
   
His plan also calls for limiting the cost of living adjustment to a maximum of 1 percent per year and restricting bonus pension payments to retirees.
   
The proposal does not affect retirement benefits current employees and retirees have already accrued.
   
Additional temporary limits would be instituted on employee benefits until city services are restored to Jan. 1 levels or if the  retirement plans experience new unfunded liabilities.
   
Reed's proposal builds on City Manager Debra Figone's fiscal reform plan, which was designed to generate enough savings over the next five years to eliminate the city's structural budget deficit, restore essential  services that would be cut this year and reopen the city's vacant libraries,  community centers, fire stations and police substations.
   
Her plan identified nearly $270 million in potential savings, including about $216 million that could be achieved just through retirement system reform.
   
The recommendations, many of which require changes to the city charter, would have to win approval by voters.
   
The city is considering a possible election in November, but how many would vote for the measure is up in the air.
   

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