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San Jose voters approve pension reforms

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San Jose voters approve pension reforms

San Jose voters Tuesday handed Mayor Chuck Reed a crucial victory with his nationally watched pension reform measure passing by a decisive margin.It was a big night for pension reform, with a San Diego measure also winning by a wide margin. City employee unions who argued the measures are illegal were expected to challenge both in court.

But voter approval of San Jose's Measure B puts Reed and the city in the vanguard of efforts to shrink taxpayer bills for generous government pension plans. Passage also strengthen's Reed's hand as he and his City Council allies work to enact the measure's reforms with a vote next week to reduce pensions for new hires.

"I want to thank the voters of San Jose for their commitment to fiscal reform and to creating a more sustainable future for our children and grandchildren," Reed said as returns were coming in. He added in an interview that he expected a big win after talking with residents around the city and called it a victory not only for taxpayers who have watched city services trimmed as pension expenses surged, but also for employees whose retirement plans will be more sustainable with the changes.

The San Jose and San Diego votes drew interest around the country as a gauge of voter support for reforming pensions at the ballot box. Gov. Jerry Brown's pension reform proposals have gained little headway in the Legislature.

Voters like Howard Delano of Willow Glen were tired of watching their
city shovel more and more tax money into government pensions far more generous than their own retirement.

"It's out of control," Delano, 60, said after dropping off his ballot. "Nobody gives me a pension."

But Yolanda Cruz, president of the city's largest union, called the measure "an unfortunate way to spend taxpayer money fighting it in court because we will definitely take it there. Taxpayer money would be better used getting services back."

Pension reform advocates saw the

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San Jose measure as a key test of how far cities can go in reducing pensions for current employees.

Unions argue that decades of court decisions effectively hold that government employers may increase but never decrease current employee pension benefits without offering something comparable in return.

Most pension reform around the state, including the San Diego measure and one approved in San Francisco last year, change benefits for new hires. But pension reform advocates and a state watchdog panel argue cutting only new hire benefits isn't enough to solve the cost problem.

Reed's Measure B goes further than other efforts in tackling current employee pension costs. He said that as a charter city San Jose has the authority to reduce pension benefits not only for future hires, but for current employees' remaining years on the job. If courts disagree, Measure B calls for the city to take the equivalent savings in pay cuts.

Among changes called for in Measure B:

Current employees keep pension credits already earned but must pay up to 16 percent more of their salary to continue that benefit or choose a more modest and affordable plan for their remaining years on the job.

Limit retirement benefits for future hires by requiring them to pay half the cost of a pension.

Suspend current retirees' 3 percent yearly pension raises up to five years if the city declares a fiscal crisis.

Discontinue "bonus" pension checks to retirees.

Require voter approval for future pension increases.

Change disability retirement with the aim of limiting it to those whose injuries prevent them from working.

Reed proposed Measure B a year ago after his efforts -- from championing new tax measures to imposing 10 percent pay cuts on city employees -- failed to erase budgetary red ink that has soaked the city ledger for a decade. Though the city projects a modest $9 million surplus in the upcoming budget, thanks largely to the pay cuts and hundreds of job cuts, a $22.5 million shortfall is expected the year after.

A key deficit driver has been the yearly pension bill that has more than tripled from $73 million to $245 million in a decade, far outpacing the 20 percent revenue growth and gobbling more than a fifth of the city's general fund. A city audit blamed the rise on a combination of benefit increases, flawed cost assumptions and investment losses.

City audits and news reports also assailed a system in which the city's police and firefighters take tax-free disability retirements at rates far exceeding those in other big cities.

Government employee unions led by the American Federation of State, County and Municipal Employees spent more than $440,000 toward defeating Measure B. Business and taxpayer groups spent more than $682,000 toward its passage.

Contact John Woolfolk


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