Despite calling the city’s unfunded liability a cancer, brought on by escalating and unfunded employee retirement costs, Mayor Chuck Reed has decided to delay treatment options. The City Council will defer any decision on declaring a fiscal and public safety emergency to Aug. 2.
The council was expected to take a vote on the issue during Friday’s special meeting. But with five of the city’s 11 unions agreeing to extend negotiations regarding pension reform to Oct. 31, city staff will now be focusing on potential savings from opt-in pension programs while also looking at a special election in March 2012 as a backup or supplementary plan. Among the opt-in proposals the city will study are ideas put forward by councilmembers Donald Rocha and Pete Constant, the Police Officers Association and the Firefighters Union (Local 230).
The reasoning behind delaying a vote Friday appears to be multi-faceted. Reed reportedly has said the city needs to protect itself from potential litigation by exhausting the negotiation process with its unions. There was also a letter sent from Attorney General Kamala Harris to the city, suggesting an emergency declaration might not be legal. And there has also been debate within the council that the city is setting itself up for years of litigation while delaying any action on tackling the problem of rising pension costs.
(One opinion that certainly did not play a role in delaying a vote was a letter sent from Cupertino Mayor Gilbert Wong to Reed and the council, warning that an emergency declaration would be “rash and ill-advised.” Reed verbally undressed his fellow mayor by asking if the letter was the viewpoint of the city of Cupertino or Wong’s personal opinion. Wong responded by saying it was his own opinion. He probably won’t use city letterhead next time.)
The delay in making a decision doesn’t necessarily mean negotiations will proceed amicably.
Employee Relations Deputy Director Gina Donnelly sent out letters to the six unions that haven’t signed an extension agreement for negotiations in good faith. In her letters, which were all worded the same to the leaders of each union, Donnelly says the city will move forward with crafting ballot measures to address the city’s mounting unfunded liability, which are estimated to be somewhere in the range of $400-650 million by 2015. Both sides currently dispute the basic framework for negotiations. (Click here for the union’s viewpoint, and here for the city’s viewpoint.)
In a memo contained in Friday’s special meeting agenda, Gurza says the city will continue to study opt-in pension plans, but there are several potential hurdles. First, not all employees are guaranteed to opt-in. Second, “employees would be required to irrevocably give up their existing level of retirement benefits and voluntarily choose reduced benefits.” Third, employees who are married would also need their spouses to sign off “because of community property interests.”
At the very least, that last detail could set up some interesting conversations at the dinner table.