City Still Wants Pension Reform Election

With San Jose’s budget shortfall coming in at far less than the $80 million expected, the City Council will defer any action next Tuesday to declare a fiscal emergency. New projections put the shortfall at around $25 million. However, Mayor Chuck Reed still wants an election next year to reform employee pensions.

The preferred election date for the ballot measures would be June 5, 2012, according to a memo sent out Thursday by Reed and councilmembers Pete Constant, Rose Herrera, Sam Liccardo and Madison Nguyen.

City Manager Debra Figone released her own memo Thursday, which also called for any action to declare a fiscal emergency to be deferred due to the surprising new numbers. But she cautioned that the city’s financial future is still uncertain. Below is the majority of the city manager’s analysis on the situation:

“Unfortunately, current retirement costs are still unsustainable. Even with the projected decrease in the dollar amount of the Annual Required Contribution for pensions in the Police and Fire Department Retirement Plan, the City’s contribution rates are projected to increase from 50.4% to approximately 60%. The fact that we will be paying approximately 60% of pay towards pension only is in and of itself unsustainable, and it is important to note that this does not include the cost of retiree healthcare benefits.

“Pending verification of the projections from Cheiron, this positive news will lower the projected budget shortfall for Fiscal Year 2012-2013. We will provide updated information as soon as possible, however at this time, it appears that the projected deficit could drop from $80.5 million to somewhere in the $25 million range. Just as we noted in the Fiscal and Service Level Emergency Report released last week, these new numbers continue to be a snapshot in time. As these numbers are reviewed and additional information becomes available, changes to the 2012-2013 Preliminary General Fund Forecast will likely be necessary and will be incorporated into the formal 2013-2017 General Fund Forecast that is scheduled to be released in February 2012.

“While the fiscal and service level emergency report analyzed potential future service reductions, we have already reduced services to a level that is unacceptable. Accordingly, the City Council has provided direction to restore services to the January 1, 2011 levels. As shown in the Fiscal Emergency Report, 28% of City positions have been eliminated in the last 10 years—a staggering 2,054 positions. Over this ten year period, the City has absorbed a General Fund shortfall of $680.3 million. A majority of these position cuts have taken place within the past three years. This shows that the cuts made thus far are unacceptable and our goal should be to reduce costs to be able to restore these very important services to the community.

“Because these numbers and the forecast are now in a state of flux, I am recommending that that City Council delay consideration of the fiscal and service level emergency declaration.”

Click Here to See the City Council Agenda for December 6, 2011.

Josh Koehn is the news editor for San Jose Inside and Metro Newspaper. Email tips to josh@metronews.com or follow him on Twitter at @Josh_Koehn.

28 Comments

  1. No one is saying “Pension Reform isnt needed It Definetly is , Everyone agrees o that.  If this issue wasnt so serious , it would be laughable at how this City has handeled it . it means that 1) The City is guilty of hiring a firm that is horrible with Math 2) The City was using over inflated numbers to begin with . It kind of leaves you feeling like our City Government is either incompetant or cannot be trusted. It is truely pathetic that neither the Dishonorable Mayor Or Dispicable City Manager will own up or fess up to the matter. This is the citys Actuaries that discovered the “Miscalculation” Doug Figone still states “it is in a state of flux”.No kidding!I truley hope that the Mayor, City Manager and clown court (Liccardo, Constant, Herrerra, Ngyun,Oliverio) will sit down and seriously decide to openly discuss options with all the Unions

    • The actuary actually works for the trustees of the retirement board, not for the city. The city was NOT using “overinflated” numbers, but an older forecast of costs provided to them by the retirement board actuaries. Forecasts change and the actuarial model incorporated a number of changed assumptions – some of which may or may not be accurate. Such is the nature of actuarial models. If

      Regardless of the temporary reprieve, retirement costs are still almost two hundred million more than they were just a few years ago and the enhancements that were made during “boom” years are unsustainable. The city also has to close a minimum of an estimated $25 million budget gap on top of $680 million in deficits that have been closed over the past decade.

      Finally, we have been talking about the pension issue for over two years and the unions had six months to negotiate to come up with adequate savings that will be ensured in order to prevent further cuts on top of the over 2,000 positions that have been eliminated already.

      Bringing reforms to the voters is long overdue. Most residents are unlikely to support further foot-dragging. If it were up to the electorate, city workers would see their defined benefit plan go away for future accruals, to be replaced by Social Security & 401(k)-style plans, like most taxpayers have.

      • The unions have been negotiating in good faith, the city hasn’t been negotiating at all because the Mayor wants a ballot measure – you don’t get in Vanity Fair with negtotiated solutions. The problem with the ballot measure is that while it is illegal, you’ll follow the Mayor’s propaganda and vote for it and then it will cost the taxpayers a fortune when it is thrown out. The only ones profiting are the slime attorneys who are advising the Mayor because they will make money no matter what (billable hours, baby!). If you didn’t notice, the CA Supreme Court just handed them and Orange County their asses when they tried another illegal pension rights grab down there. Oh, by the way, most taxpayers have Social Security & 401k’s because corporate raiders wiped out pension funds during the Reagan era and you sit back while CEO’s take $100 million salaries while running their companies into the ground. You got screwed, so you want government workers to get screwed, too.

      • @SPC: “…Finally, we have been talking about the pension issue for over two years and the unions had six months to negotiate to come up with adequate savings that will be ensured in order to prevent further cuts on top of the over 2,000 positions that have been eliminated already…”

        http://www.mercurynews.com/opinion/ci_19007667?IADID=Search-www.mercurynews.com-www.mercurynews.com

        Shane I hate to break the news – The Mercury News barely mentioned it in a lone OpEd back in September – The Mayor / Manager / Council certainly won’t tell you about this , and SJI is just a blog….

        So here it goes:

        The evil unions despite their unquenchable greed and total disregard for the current financial problems that exist worldwide (not just in San Jose) went to the negotiation table and presented The City with a pension reform plan that was estimated to save the City $467mill (nearly half-a-billion dollars??? the amount the USDOE gave Solyndra to put it in perspective) over the course of 5 years.

        The amount of savings in pension costs alone FAR EXCEEDS the City’s WORST CASE Budget defecits for more than 5 years!!! 

        The City’s negotiators took it to the City Council for a “study session” that lasted less than 8 hours. The result of the Study session was that the Council REJECTED the offer stating it did not save enough money AND the plan would take about 8 months to implement and savings must begin immediately!

        Now keep in mind that Mayor Reed was on record stating the need for a minimum of $500mill in savings before he would consider any alternative to the current plan.  Split hairs if you want between 467 and 500 mill…  BUT…. the Police union also agreed that they would voluntarily extend the 10% pay cut they took in fiscal year 2011-2012 through FY2012-2013.  This provision alone provided an immediate real-dollar-amount cost savings to the taxpayers in the City of San Jose in the amount of $30million!!!

        So total savings were really $497million – and split hairs if you must over the $3mil…

        So in light of the current budget defecit projected by the City being somewhere around $25mil for FY 12-13,  had the City accepted the Unions offer the City would be about $5million to the good and we all might feel a lot better about stadium deals and paying RDA debt with General Fund Money…

        but no, Reed and Co cut off their noses to spite their faces. Reed is the one who refuses to negotiate. Reed is the one hell bent on taking the 10% pay issue to arbitration on the taxpayers dime – didn;t he tell you voters that he was “scared as hell over arbitration!” Isn’t that why you all voted for Measure V – because you were scared of the outcome?

        Reed is the one who is proposing pension reform through a ballot measure that has been universally proclaimed “unconstitutional” by a broad spectrum of experts on both sides of the issue.

        Reed says that he has already set aside $4million in taxpayer money to fight the legal battle that will follow the ballot measure he proposes.  $4 million in time of “fiscal emergency?” for a cause that the odds are against him prevailing? Reed says “it is a risk he must take…” The only ones coming out good in that fight are …. the lawyers.

        • I had no idea that Shane was the director of finance and budget for council district 1’s Pete Constant.

          Is his lack of knowledge (or outright misrepresentation) on the state of negotiations between the “unions” and the City indicative of a lack of knowledge on the part of his boss or just the party line?

      • Well stated sir.
        Voter approved pension reform, if passed, might well be challenged in court and certain provisions could be tossed out but I believe the exercise would justify the cost. At least the electorate would finally be forced to seriously consider the pension situation and might come to have a better understanding of the forces at work which have driven employee compensation to such unsustainable levels.
        Armed with this newfound knowledge the people of San Jose might begin to make better choices when choosing candidates for whom to cast their ballot.

        • $4mil to $7mil and tied up in court for at least 5 years?  All the while the City will still be on the hook to pay into the current pension plan.

          All to learn that the existing pension system is legal and binding – something we already know? 

          Does anyone know when the second tier pension for new hires that voters demanded via the ballot box more than one year ago with the passage of Measure W will be rolled out?

      • Where have you been? POA offered 500 hundred million over five years, with others union’s involved. The city said it would take to long to implement, who’s dragging their feet now!

        Where are going to find qualified men and women to do a job that demands so much, with a social security and a 401k retirement, you won’t.

        Mayor Reed always talks about the real world. Shane Patrick Connolly do you carry a gun on your hip? Did you work this past Thanksgiving? Have you ever responded to a call of domestic violence where the suspect is waiting for you in a combative stance? Have you ever respond to a crib death of a one month old? Have you ever watched a sexual assault of a two year old that was taped, and then document it on paper for court? Have you ever been exposed to HIV and Hep C on the same call? I really doubt it. The taxpayers should be grateful that there people out there doing this job.

        I have scars in my mind that I will carry with me until the die. I do it for Shane Patrick Connolly, so he does not have too.

        And finally, this will end up in court! 16 years ago I became a police officer. I signed on the dotted line. The city and I aggreed to terms in a contract that has been vested.

        A ballot measure will not overturn my pension.

      • dont get it twisted it is the City who has been pushing this agenda. The unions of the City have bent over backwards trying to negotiate , but the City never had any intention of negotiating .they went thru the motions just so they could take it to the voters.Every one agrees pension reform is needed BUT it has to be done legally, with union concessions. The City will be in litigation for years and spending millions of dollars only to lose.vested benefits can not be taken away.it only makes sense for the city and unions to try and reach an agreement. there is no doubt that this Mayor , City Manager, Council and Actuaries have Lied .

      • Thanks for exposing yourself as either clueless or a liar (maybe both). The City has negotiated in bad faith to put forward an illegal ballot measure. You might be able to hoodwink voters, but a court of law will be a completely different matter. We can only pray that your boss and the other co-conspirators can somehow be held liable for punitive damages instead of the taxpayers.

  2. As a retired city employee I’m glad to see that the information and actuary report shows a savings to the city.  But more importantly will the city actually engage in good faith bargining in light of the updated information.  Labor has been meeting with the city reps on this for some time now.  The Mayor, Manager and those that were supporting the fiscal emergency declaration have set their own time lines for the purpose of the process to fail.  Labor still will want to work with the city on the reforms needed.  But how can labor trust the city at this point.  The Mayor and Manager’s hidden adgenda is very clear now.  The city now has the chance to try and build that trust back by allowing good faith bargining/negotiations to actually happen this time.  We do not need mean spirited and illegal ballot measures to get the job done.

    The other part about this that can never be repaired is the fact that many employees retired well before they wanted to.  They did so to protect what they already had.  I’m one of those former city employees.  I did not want to leave when I did but you could see the set up. Through politics and attacks and the lack of support from the city the city was able to demonize the public service employee to the citizens of San Jose.  Now the city has forced out employees who had a wealth of knowledge and history on how to provide the best service to it’s citizens.

    All of this one dimensional effort to balance the citys books has now been a waste of time.  In 2008 the city managers budget doc. included directions on increasing and finding new revenue.  Yet nothing even close to substantial work has happened on this direction.  No fresh ideas, no innovative ways, just hammering at the same thing we have seen in this country throughout history, blame it on the workforce, organized labor or not.  Why is it that other citys and their labor groups have come to agreements elsewhere in the state of California but the city of San Jose can not.

  3. Hey Chuck!  Whatever happened to “No lying, no cheating, and no stealing”? It seems to me that you violated everyone of those rules and have conspired with your cronies both in the City and out to lie to the public, cheat and steal from both the public and employees! The only honorable thing for both you and Deb is to step down and resign!!!

  4. “The Council has decided to defer any action regarding a fiscal emergency.”  Of course they did, even the State Attorney General and the city’s own legal council thinks what they had planned to do was illegal.  Nice try.  Maybe now the mayor will take some of the offers that the unions have put forward toward pension reform.

  5. I simply cannot understand how both the City and Cheiron could have bungled the math so badly.  And Fig_One’s statement about numbers being only a snapshot in time… well, I suggest they take those snapshots more often to avoid cluster-f**ks like this one! 

    Oh, it might do well too to hire some actuaries who truly have a handle on financial principles. These folks must have gone to a diploma mill like Univ. of Phoenix!

  6. Chuck and Deb and the traitor Constant and brain dead PO all know that a ballot measure would be illegal and would lose in court.  The other 2 are cronies as well.

    Still they want to move forward but just not right now because they know more dedicated employees will retire before losing their approved buyouts. So they will get the PD down to 800 and God knows how low for the rest.  Is that when you will move the PD into the NEW building in south valley and SELL the old building (which will have to be torn down-nobody in the right mind would move in) and land for a nice profit! Then you could sell the circus parking lot as well.

    Gee how much of the city fund will you spend on the land sale court challenge that was just filed on the proposed A’s property.  I see you you have a sigh up on the new Earthquake property, how much of a free deal did you give Wolf on that property.

    Thanks for making all PD employees to find street parking again as you displaced all of them so you can bring the circus to town.  Just shows how much you hate us.

  7. Lets see… 25 Mil deficit and how much is the land worth that the City wants to give to the “A’s”? Oh yea thats right, it is worth $25 Million.  HMMMMM Sounds like the SJ residents are getting screwed by Mayor Burns. It is time for action!

  8. If Emperor Reed and his followers on the council could be held liable for punitive damages (the taxpayers will be) I don’t think they’d be so hell bent for glory on this one. Hey Chuck, name one case or legal opinion that supports your ballot measure…oh wait, you can’t. For all you Reed followers on the band wagon, ask him that question. He can’t answer it. Over 70 years of case law, the California and U.S. Constitutions say he’s wrong. When will you realize he’s intoxicated with the power and notoriety? He doesn’t want it to end, no matter the cost.

  9. Another great article from “we hate you public safety” from the Mercury news.

    Bout time you start to mention other city employees pensions as well.  This is not about pensions, it is about bad deals the city has made in the past and their dumb financial decisions the council continues to make.

    Bet the retied Liberian with a 220K salary will make a nice pension as well.

    Look up the salaries of the city “non public safety” and see why we are in this mess.

    Very poor decisions!  Public land sales, RDA, the list goes on and on.

  10. Got a 92 million building moth balled in south SJ.  Guess after all personnel at the PD jumping off this sinking ship in January 2012 you can move the whole department ( 800+ ) into the building and sell off the old land / parking lots.  This should put you in the black.

    Thanks for all your support.

  11. How much did the city pay under the radar to fund the Earthquakes stadium.  (Lee Wolf again)  How may people really care about soccer?

    Boy I want a special box to watch a losing team.  Come on, unless a mexican team is coming to play who cares about soccer here.

    The team will lose money and again we will have to pick up the lost money.  Good call Chuck.  Funny how it will be build next to our money sucking airport.

  12. I would like to vote on this if and when the A’s Stadium is on the ballot – just because it would make things interesting!

  13. What I want to know is why is everyone saying we need reform?  there are factors that go into the ability to sustain the retirement funds.  I think a good look needs to be taken at where all this money goes and what the City has been doing with it. Where does the interest go.  The city has lied to the public to make them believe the city workers are stealing money.  Far from the truth the City offers a pay package and the city has been spending the retirement funds knowing that one day the bill will become due. These elected liars know they will be long gone when the bill comes due. Their pension is safely tucked away.  What is never addressed is an employee is offered a certain pay and where does that money go. I agree there needs to be adjustments but maybe not to the average.  I do not believe there is a need for anyone in the government sector to take home a 25k a month pension.  it maybe feasible to get to 90% with a max pension salary. 

    What we know for certain is Reed is dishonest. Figone is a complete waste she cannot add and she cannot manage.  The two of them are the worst of the worst they are exactly what everyone in america hates about the government. If Reed could find a way to wage war against mexico by lying about WMD hidden in pinata’s he would be attempting to draft every man in woman in San Jose to fight.  Reed is a tyrant liar and a thief. The council are weak and paid for. They fear Reed and have lost all of their morals. 

    All Reed cares about is getting his Ball park in play for his billionaire friend who will sell it. Odds are it will go bankrupt at some point and leave the city holding the bag keep in mind the city plans to accept the Deed to the ball park. The billionaire will avoid having to pay taxes anyone wonder why he wants to move.

    It is time for a grand jury and an investigation into exactly what is going on there is a massive miss use of public funds.

  14. If any one of the council members vote on this measure, it is going to tell a lot about their character. They KNOW this measure is illegal. This vote has more to it than just the measure, itself. It has to do with ethics.