The now “famous” deadlocked 5-to-5 vote last week, regarding whether or not to move forward with a second-tier retirement system for new employees, was fascinating to watch but extremely disappointing in the end.
Sixteen months ago, 74 percent of San Jose voters approved of the city adopting a second tier for pensions. One could feel the shock in the chambers when half the council did not support the voters.
I believe it was a lost opportunity for labor to not embrace a second tier. If the unions would have embraced a second tier, it would have taken pressure off if the first tier, but that opportunity is now gone.
Retirement in the United States was never supposed to match your peak years of net income nor surpass the years actually spent working. Second tier is about new employees who do not work for the city yet.
One speaker had a good point—that a second tier should be actuarially sound. Ultimately, only a 401K would do that, but unfortunately there are not enough votes on the council to do adopt a 401K for new employees. Even the second tier considered last week would still produce debt for the next generation but significantly less than the current generous level of benefits.
Regarding health care, the city is subject to national price increases and the only way to reduce costs today—outside of a mandatory wellness program, like the city of Chicago—is raising deductibles. Neither the city of San Jose nor you and your family are immune to the double-digit health care cost increases. All residents of San Jose are included in the costs and fees that people pay for health care. All individuals across the country weigh deductibles/fees in their decisions on health care.
Another speaker at the council meeting said that he paid 1.45 percent towards his future retiree health care when he was employed by the city. However, that did not keep up with double-digit health care costs nor did it put any money aside to pay the billion dollar-plus unfunded liability.
If unions had agreed to pay a little something towards the unfunded liability when they agreed to a 50-50 split in 1984, we would not face the peril of running out of funds to pay for retiree health care. However, that would have required someone then to pay/sacrifice more, which it seems no one wants to do on any given day at any level of government when you can simply pass it on to the next person.
Retirees will still have healthcare and Medicare supplementals provided by the city, which in contrast is thousands of dollars per year if purchased on the open market. Current employees would avoid paying approximately $2,000 a year out of their paychecks with the implementation of a second tier since they must split the cost 50-50. Without changes, current city employees’ health care costs will increase dramatically.
I accept that some of my colleagues view important issues quite differently. Some of my colleagues voted against putting Measure W on the ballot in 2010 and also voted no last week. One of my colleagues has a long track record of publicly endorsing Measure W during his campaign but voted no last week as well.
I invite you to a conversation at City Hall on a similar dilemma at 7pm on May 9 with the Concord Coalition. The evening will allow you to make tough choices that elected officials from both parties have not made for decades at the Federal level. RSVP is required: http://concordcoalition.org/RSVP