After launching a statewide ballot initiative to scale back pension benefits for public employees, San Jose Mayor Chuck Reed reached out to union leaders, suggesting an open dialogue in the process.
Jon Ortiz, who runs the Sac Bee’s state worker blog, wonders if the invitation was shrewd, naïve and/or insincere.
In a letter to the California Teachers Association and a dozen other public worker unions, Reed explains why he and other mayors created “The Pension Reform Act of 2014,” which would grant local governments the right to negotiate existing workers’ future pensions and retiree healthcare benefits.
“As mayors, we have seen firsthand how the rising cost of public employee retirement benefits has forced cities, counties and other government agencies to cut public services lay off hard-working employees and defer badly-needed improvements to critical infrastructure,” Reed writes in the Oct. 26 letter.
That’s not the fault of public employees, Reed adds, but of elected officials—including himself.
“In most cases, unfunded liabilities are the result of elected leaders making promises to their employees they cannot afford to keep,” he writes. “However, the system is simply unsustainable and we believe that it is unfair to our dedicated public servants to continue down this path.”
He signs off by inviting union leaders to contact him if they’re amenable to a meeting. Unlikely.
Reed’s been at odds with public employee unions since he convinced 69 percent of San Jose voters to pass a municipal pension reform measure in 2012. Measure B was challenged the get-go, launching 10 lawsuits that challenged, among other things, the constitutionality of altering contractual agreements regarding pension pay.
Reed’s Measure B reforms in San Jose ask city workers to chip in 16 percent more of their take-home pay into their own retirement. It bumped down new hires to a lower benefits tier moving forward and gave current employees the option of dialing down to the lesser, second-tier pension package.
San Jose clocked $3 billion in unfunded pension and healthcare liabilities this year. Pension payouts siphon off 20 percent of the General Fund budget, according to city officials. As is, pension funds don’t accrue enough revenue to pay liabilities, Reed says. On the flipside, workers don’t contribute enough to cover the cost and the city can’t keep up with the cost of so many of its workers retiring early.
The arguments against Measure B say you can’t take back an employee’s “vested rights,” or what’s already been promised. Pension, even if it hasn’t been paid out yet, counts as something already earned, explains CalPERS, which has $265 billion in assets, making it the largest public employee pension fund in the US. Pensions are earned, but defined as deferred compensation, and therefore pensions are protected under the state constitution. San Jose, however, has its own pension plan and is not part of CalPERS.
“The courts have clearly established that California employees have a vested right to the level of benefits promised to them when they are first employed,” CalPERS Deputy Executive Officer Robert Udall Glazier said after Reed filed for his state initiative. “This prevents not only a reduction in the benefits that have already been earned, but it also prevents a reduction in the benefits that an employee has been promised for their future service.”
It doesn’t help Reed’s goodwill gesture that he’s sought help from a shady ex-Enron billionaire, John Arnold, and a “vulture fund” led think-tank to rally support for the state ballot measure.