San Diego and San Jose Public Employees Face Pension Reforms

On Tuesday, June 6, 2012, voters in San Diego and San Jose overwhelmingly approved ballot measures to cut city workers’ retirement benefits. Sixty-six percent of San Diego voters supported the pension initiative, while nearly 70 percent of San Jose residents endorsed a similar initiative.

The San Diego measure replaces guaranteed pensions with 401(k)-style plans for all new hires except police officers. It also proposes a five-year freeze to the portion of current workers’ salaries used to calculate future pensions. The salary freeze still requires action by the mayor and the city council.

The San Jose measure goes further because it affects current employees in addition to new hires. Current employees will keep the pension credits they have already earned but will have to pay up to sixteen percent more of their salary to continue that benefit or choose a more affordable plan for their remaining working years.

The relevance of the initiatives stem from a period of increasingly high pension payouts. In the last decade, pension payments of San Jose city workers have jumped from $73 million in 2001 to $245 million in 2012, accounting for over 25 percent of the municpal budget.

San Jose Mayor Chuck Reed hailed the contest as being “really important to our taxpayers,” claiming that the proposal was necessary for paring back “these skyrocketing retirement costs.”

Public employees and labor groups remained disappointed, with Dave Low, chairman of Californians for Retirement Security, asserting that the approval of the initiatives “will mean broken promises and less retirement security for working families and seniors, many of whom do not receive Social Security.” Others, like Michael Zucchet of the San Diego Municipal Employees Association, believe that the initiatives do not achieve their goal of saving money and were motivated instead by politics.

The San Diego ballot text is available to read here. The San Jose initiative text is available here.

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