Judge: San Jose Can Cut Pay But Not Pensions

Ruling will have impact across state

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    NEWSLETTERS

    The voter-approved, pension-cutting measure in San Jose used as a model has been overturned by a judge. Stephanie Chuang reports. (Published Monday, Dec 23, 2013)

    As goes San Jose, so goes California -- and in San Jose, the pensions are going nowhere.

    San Jose cannot go ahead with voter-approved pension cuts to help balance its ledger, a judge ruled Monday.

    Union leaders, who opposed the referendum known as Measure B, say the judge in this decision clearly sided with them, striking down the voter-approved measure to have employees pay into their pensions and allowing them to keep annual cost-of-living increases. But San Jose City Council members are claiming victory as well, saying the decision allows them to take the money out of the workers’ pay.

    QUESTIONING PENSIONS: An NBC Bay Area Investigative Series

    The ruling on Measure B, all but certain to be appealed, will affect nearly every city in California struggling to make ends meet in the face of crushing pension obligations, much of which are unfunded.

    Outgoing San Jose Mayor Chuck Reed, a Measure B proponent, is pushing a similar measure statewide. That effort could be harder now with the legal precedent in place.

    Reed, who is out of town visiting family for the holidays, said in a statement that the ruling "protects $20 million in annual savings the City is already reaping due to the elimination of bonus pension checks and changes to our retiree healthcare plans."

    City Councilman Pete Constant was once a director for the San Jose Police Officers Association, the leading plaintiff, in the case. He has also filed papers to run for mayor.

    “I think that this is a case ripe to go all the way to the Supreme Court to have final rulings on what does this 'vested rights' doctrine really mean,” Constant said. “Does it mean, because of promises made by politicians that are unsustainable, does that mean cities should go bankrupt and be unable to provide services to residents? So, for me, that’s the real central question.”

    Keeping the pensions intact is a win for the San Jose Police Officers Association, the Mercury News reported.

    San Jose tried to stem the tide with voter-approved Measure B, which was opposed by unions, who said that pensions were "vested rights" and could not be taken away.

    Measure B was to save San Jose as much as $68 million a year, but it required employees like police and firefighters to contribute "as much as half" of their pay towards pensions, the newspaper reported.

    “I hope the city doesn’t appeal it, but knowing the mayor the way I know him, I would be shocked if they didn’t,” said Jim Unland, president of the San Jose Police Officers Association. “And the rest of the politicians – we have five city council members running for mayor, and they’ve painted themselves in a corner. And for them to show the political courage that it would take to step up and say ‘we were wrong’ and we need to get back to table and work at this collaboratively, I think is too much for any of them to ask.”

    San Jose will now try to figure out how to cut employee pay by July 1, when the city was set to implement Measure B.