While unions oppose key parts of Gov. Brown’s 12-point pension reform plan in the Legislature, local officials say union allies are using state agencies to try to derail or undermine local pension reforms on the June ballot in San Jose and San Diego.
The widely watched local measures, going beyond the governor’s plan, would cut pension benefits promised current workers, something now mainly limited to new hires. Major court battles are likely if voters approve the potentially trendsetting measures.
A legislative committee yesterday approved a request by Assemblyman Jim Beall and a half dozen other San Francisco Bay area Democratic legislators to have the state auditor probe San Jose pension costs.
At a city hall news conference Monday, Beall reportedly urged the city council to delay a vote Tuesday on a revised pension reform ballot measure until the audit is completed and the Legislature acts on pension reform.
The council voted 8-to-3 Tuesday to place the revised pension reform on the June ballot, broadening a 6-to-5 vote in December. The two who switched, Nancy Pyle and Don Rocha, told union members in the audience San Jose residents want pension reform.
There were shouts of “liar” from the audience and other references Tuesday to Mayor Chuck Reed’s early warning that annual pension costs could reach $650 million by 2015, an estimate since scaled back to $400 million and then $300 million.
Reed said $650 million was a worst-case estimate, cited along with the $400 million estimate, that was not used in labor negotiations. He emphasized Tuesday that city retirement costs this year are $245 million, up from $73 million 10 years ago.
Unions said in an ethics complaint the $650 million estimate was used to obtain labor concessions. Unions also filed a complaint with the U.S. Securities and Exchange Commission contending that omitting the worst-case estimate misled city bond buyers.
One speaker Tuesday said directly, while others made allusions, that the local NBC television station, which aired the first story criticizing the $650 million estimate, and the San Jose Mercury News newspaper have very different views of the issue.
The television station reported that Beall’s audit request “comes after an NBC Bay Area investigation found Mayor Chuck Reed may have used an exaggerated five-year pension projection to sell pension reform as a ballot measure.”
A Mercury News story on the audit quoted Reed: “Our city hall unions know very well that there is strong voter support for pension reform. They’re doing everything they can to keep it off the ballot. And they have a lot of friends in the state Legislature.”
The president of the largest city worker union, Yolanda Cruz of AFSCME Local 101, told the council her union has been “scapegoated” for not participating in negotiations. She said she challenged the pension numbers more than a year ago.
“We could not get confirmation on how the numbers were achieved — what data was used, how it was calculated and why it was using projections that were overstated at best,” Cruz said.
A Mercury News editorial this week said Reed got the $650 million estimate from a city retirement director at a council meeting a year ago. But council decisions are based on official projections by independent actuaries and the two city pension boards.
The editorial said the run-up to the vote Tuesday “has devolved into a three-ring circus — with the clown imported from Sacramento, where Assemblyman Jim Beall wants a legislative committee to audit San Jose’s pension system for purely political purposes.”
In San Diego, city attorney Jan Goldsmith said the state Public Employment Relations Board is trying to block a pension reform initiative placed on the June ballot by gathering 116,000 voter signatures.
“Labor unions, vowing to fight by all means, sought help from a former labor activist now serving as general counsel of PERB,” Goldsmith said in an op-ed article last week in the U-T San Diego newspaper, referring to Suzanne Murphy.
After a judge refused a PERB request to block the initiative from the ballot, said Goldsmith, the board scheduled a hearing April 2 in Glendale to pursue an administrative process aimed at preventing the city from enacting the reforms if voters approve them.
He said the board argues that since the initiative is backed by Mayor Jerry Sanders (not a formal proponent) it’s a city-sponsored measure. Thus union negotiations were required first and then a city council vote to determine if the reforms go on the ballot.
“Never in the history of California has there ever been a requirement to negotiate with labor unions over terms of a citizens’ initiative placed on the ballot by voter signatures,” Goldsmith said in the article.
He cited Gov. Brown’s support for a tax initiative as an example of how governors and mayors have a a long tradition, and constitutional right, of advocating for and against initiatives.
The San Diego initiative would give new city hires a 401(k)-style retirement plan instead of a pension. For current workers, the amount of their pay used to calculate pensions would be frozen for five years.
Goldsmith said the city charter allows changes in “pensionable” pay if done properly. He has filed a lawsuit in an attempt to enforce a charter provision calling for “substantially equal” pension contributions by the city and its employees.
In San Jose, the ballot measure would place new city hires in a retirement plan with lower costs and benefits based on Social Security and a plan that may or may not combine a pension with a 401(k)-style plan. The details would be negotiated with labor.
Brown’s plan would place new hires in a similar “hybrid” plan. But unions don’t like the risk of the 401(k)-style part. And experts say costs for the old pension plan will go up as it’s phased out and switches to less risky and lower-yielding investments.
The San Jose measure gives current workers the choice of the new plan or paying more to continue in the old plan, up to 4 percent of pay a year until reaching a total of 16 percent or half the long-term cost of paying off a $3 billion unfunded pension liability.
If current workers choose the new plan with lower costs and benefits, pension amounts already earned under the old plan would not be cut. Reed said the city charter and municipal code allow the city to raise the pension contributions of current workers.
San Jose is in deep financial trouble. About 20 percent of its general fund is spent on retirement costs, far above the 4 to 5 percent common among government employers reported by a governor’s commission early in 2008.
The city contribution to police and firefighter pensions is equal to about 50 percent of their pay. In comparison, the state contribution for the Highway Patrol is about 31 percent of pay.
City workers have received a 10 percent cut in pay. The workforce has been cut by 2,000 during the last decade to 5,400, a 27 percent reduction. Hundreds of police have been cut along with four fire engine companies and one truck company.
Street, sidewalk and park maintenance have been cut along with park rangers, gang and crime prevention and youth and senior services. The city has been unable to open a new $90 million police substation and four new libraries built with bond money.
“San Jose has become a leader in dealing with skyrocketing retirement costs that threaten local governments all over this state,” Reed said Tuesday. “We have been a leader because we were forced to due to the impact on our city of skyrocketing costs.”