San Jose officials Tuesday called for softening a proposed June ballot measure to trim city worker pensions while acknowledging they failed to reach a deal with employee unions to slow growing retirement costs, ensuring a tough election fight that could draw national interest.
A divided City Council had approved a June ballot measure in December but held off sending it to the registrar of voters to allow for changes based on mediation talks with workers. City Manager Debra Figone said that unless the council votes to change or withdraw the ballot language, it will go to the registrar as it was approved in December.
But Figone recommended Tuesday that the council, at its March 6 meeting, soften the language approved in December to reflect union concerns that arose in mediation. The city must submit the language by March 9 to meet the deadline for the June 5 primary election.
The new proposal would reduce additional amounts that employees would have to pay toward their pensions to cover accumulated debt in the retirement system, and make benefits for new hires slightly more generous.
Figone called the revised ballot measure “a critical step toward reducing retirement costs” that is needed to protect the city’s “viability and public safety” while maintaining “fair” retirement benefits for its workers.
But union leaders, who have amped up criticism of the city’s pension approach in recent weeks, were not impressed. Earlier this month, they accused Mayor Chuck Reed and other top city officials of stoking public outrage and stampeding employees into concession talks by claiming the city’s $245 million retirement bill could balloon to $650 million by 2015, a figure union leaders say wasn’t based on solid independent research. The official projection was $400 million but is expected to drop to account for layoffs and pay cuts last year.
“There are 650 million reasons why we oppose this latest ballot measure, and it starts with it being premised on a bogus pension cost projection coming out of the mayor’s office,” said Nancy Ostrowski, who leads a union of city engineers and architects.
San Jose has emerged as a central battleground in a public employee pension cost debate that has gripped state and local government officials nationwide and outraged both taxpayers and unions.
In California, efforts to tackle the problem statewide have stalled. A private group, California Pension Reform, abandoned efforts to put a measure on the ballot earlier this month, blaming Democratic state Attorney General Kamala Harris for a summary description to voters that its president, Dan Pellissier, called unfair and misleading.
Gov. Jerry Brown last year proposed a package of pension reforms that many lauded as a serious effort but gave long odds of passage through the Democratic state Legislature.
San Jose and San Diego have in turn drawn greater attention for efforts to curb municipal pension costs through June ballot measures. San Diego’s measure, backed by Mayor Jerry Sanders, would put new city workers except for police on 401(k)-type retirement savings plans. City unions fighting the measure claim it violates laws governing labor talks.
The San Jose measure calls for making current workers pay more toward their pensions and reducing retirement benefits for future hires. Union leaders say it would violate their rights and note that the city has warned its bond buyers that its pension reform plans are legally risky.
“They’re telling Wall Street that their pension scheme is chock full of legal risk, but they’re not telling that to the public,” said Robert Sapien, president of the San Jose firefighters union.
San Jose workers already make sizable contributions toward their retirement benefit, which also can include free retirement health insurance premiums. But the city pays more than three times as much as employees, including covering all the “unfunded liability” costs for market losses and retroactive benefit increases.
The proposed ballot measure would have workers pay up to half the “unfunded liability” bill. But the modified measure reduces the cap on how much workers would pay as a percentage of their paycheck.
Reed said he supports Figone’s recommended changes and that they show that the city is making a sincere effort to negotiate with workers.
“We’ve moved a lot, but it’s been in response to what we heard in negotiations,” Reed said. “We’re trying to accommodate the legal constraints and trying to fashion something that works. But the fundamental problem is being addressed, and that’s the key thing. That’s always been my goal, is to solve the problem.”
The changes came the same day as a new report from the Stanford Institute for Economic Policy Research found San Jose has the highest average pension for public safety workers — $90,612 — and second-highest for other employees — $39,076 — among 20 of the state’s largest city and county retirement systems.
The report said future costs will vary greatly depending on assumptions of investment returns that offset city and employee costs. San Jose and other pension plans have been lowering those assumptions to reflect today’s more uncertain market. The report said San Jose would have to pay nearly $400 million this year for retirement benefits if it used conservative risk-free assumptions.
Contact John Woolfolk at 408-975-9346.
