Allegations Fly Over San Jose Pension Report
SAN JOSE (KCBS) -- A new city audit revealed that San Jose's pension system is $2 billion short of covering employee and retiree benefits.
Mayor Chuck Reed called rising pension costs simply "unsustainable."
KCBS Chris Filippi Reporting:
The "Pension Sustainability" report, released Wednesday by the city auditor, assessed the long-term future of San Jose's pension benefits and the potential impact of increases in pension costs on city services.
"The impact of rising pension costs has meant that San Jose can't hire more firefighters, police officers, librarians, gang intervention workers," Reed said in a statement. "As mayor, I think our growing city needs to be providing more services, especially in these difficult economic times."
Retirement costs tripled over the last decade, according to Reed. The city's general fund saw an increase of just 21%, while the average cost per employee rose by 87% percent, and 99% for firefighters and police officers.
Reed attributed a portion of the high costs to outside arbitrators who award public safety unions with pay and benefit increases.
The city was also faced with a $1.4 billion deficit in medical and dental coverage for retirees.
San Jose Police Officers Association president George Beattie took exception to Reed's claims, and countered that the problem wasn't the pension plan but wasteful government spending.
"The airport," declared Beattie. "They spent $1 billion on that. Right now, flights are coming in very low and in my opinion soon the only thing that's flying out of there will be courier pigeons."
In short, said Beattie, the pension plan wasn't to blame, as Reed alleged.
"What you have now is the mayor using sound bites, attacking our pension system. In our opinion, he's trying to deflect from the wasteful spending that the city has embarked on for many, many, many years."
The apparent war of words was destined to be settled by voters next month. Measure V would change the rules for police and firefighter arbitration, while Measure W could create a lower tier of pension benefits for new city hires. Both qualified for the November ballot.
According to terms of San Jose's charter, employees were to be provided with a defined benefit retirement plan, a minimum employer match of over 250%, a retirement age of 50 for police and firefighters and 55 for non-sworn employees, and city-guaranteed benefits for life - based on final compensation.
While acknowledging that San Jose has "limited legal maneuverability," in changing its pension system, the audit recommended alternative ways for the city to control costs, such as additional cost-sharing by employees, a second tier pension for new hires, and joining the California Public Employees Retirement System.
"The city will continue to face considerable financial risks from rising pension costs for years to come," the report concluded. "Understanding how we got to this place, identifying the major cost drivers of the city's pension plans, and assessing alternatives for a sustainable future, are only first steps towards solving the problem."
To close an overall $118 million budget gap, the city asked all employees to take a 10% pay cut earlier this year. Growing pension and employee costs necessitated the concessions, cuts to services and layoffs, Reed argued.
"These out-of-control costs are why we can't keep all of our libraries, community centers, and swimming pools open," Reed said. "The current system is unsustainable."
Click here to view the audit report.
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