Today, the San Jose City Council will vote on whether to take its most significant action toward changing the course of our city budget after a decade of deficits and painful cuts in services to our residents. We will vote on the final language of a retirement reform ballot measure that will go before the voters in June.
I, along with Mayor Reed and some of our colleagues on the City Council, are recommending that the city manager’s proposed modifications to the ballot measure be adopted and that the measure be placed on the June ballot. You can read our memo here.
The city manager’s modifications to the retirement reform measure incorporate suggestions that came from the city’s public employee unions during eight months of good faith negotiations, including over 20 sessions with a state mediator. The city manager’s report, along with the proposed ballot language may be found here.
Despite the fact that a number of changes have been made to accommodate union leaders’ concerns, they have not come to agreement with the city on the proposed ballot measure. Now they, along with their attorneys and their allies on the council and in the state legislature, have launched a multi-pronged effort to try to delay, obstruct or derail a pension reform ballot measure. Their well-orchestrated attacks have included a full-scale media campaign against Mayor Reed, baseless ethics complaints, a meritless SEC complaint and now a lawsuit against city employees. There are well-funded groups working full-time against the interests of San Jose’s residents, but I am confident that most will see right through the din of distraction they are attempting to create.
Some of the same people who have attempted to thwart the retirement reforms that we will vote on this Tuesday have questioned the legality of the reforms. A public legal opinion released today concludes that the proposed reforms are legally defensible and suggests that the changes proposed to the measure have minimized or eliminated many of the city’s legal risks with respect to the measure. You can read that opinion here.
Putting a pension reform measure on the June ballot is critical to restoring the fiscal well-being of our city. Whether the projection of future annual pension costs are $300 million, $400 million or $650 million, we know for a fact that these costs have more than tripled in just ten years, going from $73 million in Fiscal Year 2001-2002 to $245 million this year. Future pension projections are extremely volatile and can fluctuate with the market and actuarial assumptions, but we know that even under the rosiest of scenarios we have a serious problem.
As pension costs have skyrocketed, they are consuming an ever-greater portion of our General Fund dollars, services have been cut, 2,000 city positions have been eliminated, and the backlog of infrastructure maintenance continues to grow and now totals in the hundreds of millions of dollars. The city council owes it to the residents of San Jose to begin to restore services and tackle neglected maintenance needs. The only way that we will do this without further burdening the city’s taxpayers is through pension reform.
The city council has been discussing the need for pension reform for over two years, and in those two years alone, pension costs have increased by $100 million a year. But it has not only been Mayor Reed and I that have been sounding the alarm over pension costs, many independent voices have sounded the alarm, as well. The following reports, issued as recently as two weeks ago and going back to 2010, highlight the unsustainable pension obligations we face:
Northwestern University report predicting “dire outcomes” for municipal pension systems, including San Jose’s.
The problem with our growing and unsustainable pension costs has been well-documented, and the costs were previously validated by an actuarial assessment done by one of the city’s unions — the Police Officers’ Association. We cannot begin to restore services until we get long-term structural costs under control, and the biggest pieces of this cost puzzle are those of pension and retiree healthcare costs.
The retirement reform plan that will be voted on March 6 is sensitive to many of the concerns expressed by our employees and retirees and will save the city hundreds of millions of dollars in the years ahead. To see a summary of the plan, click here. The savings produced by this plan will help put an end to the annual deficits we’ve experienced for a decade and allow us to restore essential services to our residents and begin to tackle our infrastructure maintenance backlog. The savings will allow us to invest in the technologies that will help existing city staff maximize their efficiency, improve services to our residents and create new and innovative ways for us and our neighbors to interact with City Hall.
Please join me in supporting the retirement reform measure on today’s council agenda.