San Jose Mayor Chuck Reed said the city is left with limited and difficult choices while he was participating in a panel discussion about the pension crisis Monday at Stanford University.
The discussion, conducted by the Stanford Institute for Economic Policy Research, included a panel of eight speakers from the city of the San Jose, Stanford University and the California Teachers Association.
Reed was one of three representatives for San Jose, along with Vince Sunzeri, from the San Jose Police and Fire Department Retirement Board, and City Commissioner Charles Jones.
Earlier this year Reed recommended a proposal that calls for setting limits on retirement benefits for new employees, current employees and retirees. He has said the proposal would help the city avoid further cuts to services and the loss of hundreds of jobs.
On Monday night, Reed said the city has to either pay retirees half of what the city is obligated to pay them or nothing at all.
"We've chosen not to do that," he said.
Reed said retirement costs have increased from $73 million in 2001 to $245 this year. He said the rise in costs is contributing to the city's recurring budget deficits. This year, the city laid off hundreds of workers, including 66 police officers and reduced library service to three days a week due to a $115 million deficit.
Retirement costs are projected to rise to a towering $430 million by 2016, and could be closer to $650 million after actuarial adjustments.
Reed said the city pays 25 percent of its general fund toward the retirement system.
"We're in a very difficult spot," Reed said, adding that paying that money is increasingly compromising the city's ability to deliver services to its residents.
"When do you cease to be a city? Where will we be in 2016 if we fail to act?"
Reed maintained the problem cannot be addressed by reducing services and cutting benefits that retirees have already earned.
Sunzeri praised the mayor for "not kicking the can down the road before it was fashionable to kick the can down the road."
He said the solution lies in all parties involved to make difficult sacrifices.
Jones reminded the panel that the city's pension crisis affects all, not least the citizens of San Jose.
"It's hard to know who's right or who's wrong or who's responsible for what," Jones said. "We're dealing with contractual promises we've made in the past and the chickens have come home to roost."