Voters in two California cities have approved cuts to retirement benefits for their city workers.
“The public is frustrated,” said San Diego councilman Carl DeMaio. DeMaio ran as Republican for mayor with the stance on cutting the pensions. He has now advanced to a general election ballot in a November runoff. Voters in San Diego approved Proposition B with two-thirds of the majority vote while Measure B in San Jose was approved by 70 percent with all of the precincts being counted.
“The voters get it, they understand what needs to be done,” said San Jose Mayor Chuck Reed. Reed is a Democrat and has repeatedly said that pension reform is his biggest goal as mayor.
In 1999, the payments to the city’s retirement fund in San Diego were at $43 million. In 2012, that number jumped to $231.2 million, which equals 20 percent of the city’s general fund budget. This budget is responsible for paying for daily operations of the city. As the pension payments increased, services were cut. Some services that suffered included a reduction in recreation hours, deteriorating roads and firehouses sharing trucks and engines. The workforce for the city has been cut by 14 percent to 10,100 employees.
In 2001, the pension payments for San Jose were at $73 million. In 2012, the pension payments sit at $245 million, which is equal to 27 percent of the general budget fund for the city. At the start of the previous decade, voters in the city approved construction bonds that would help build four new libraries and a police station. None of those buildings have opened yet because the city cannot afford to run them daily. San Jose boasts a population of 960,000 and it cut its employee ranks by 27 percent to 5,400 over the past 10 years.
“A lot of employees are disheartened,” said Yolanda Cruz, president of the San Jose Municipal Employees Federation. “We’ve been made the full problem of what’s been going on.”
A six-year freeze is placed on pay levels in San Diego to determine pension benefits unless there is a vote of two-thirds majority in the City Council to override the freeze. New hires of the city, aside from police officers, are placed into 401(k) plans. The measure was placed on the ballot after 100,000 residents in San Diego signed petitions.
The measure for San Jose forces workers to pay at most 16 percent of their salaries to keep retirement plans or modest benefits. Any new hires for the city would receive less generous benefits. The measure was placed on the ballot by a City Council vote of 8-3.
“It’s novel but it’s certainly not radical,” Reed said. “Mayors across the country are very interested. We’re at the leading edge but we’re not alone.”