San Diego and San Jose voters took public pension reform into their own hands Tuesday in a way Sacramento has proved mostly unwilling, voting for some significant changes and cutbacks to benefits for their city employees.
This morning, public unions in San Jose are announcing the suit they'll be filing to try to block the implementation of Measure B. Via the San Jose Mercury News:
An email from the unions sent early this morning said, "Following the passage of San Jose's Measure B—a City ballot measure that unlawfully modifies pension benefits for city employees-San Jose's Police Officers, Fire Fighters and other workers will file multiple lawsuits to enjoin the City from implementing the unlawful changes to employee pensions, health care and disability benefits."
The changes include requiring current employees to contribute a greater amount to their pension funds or choose a cheaper plan, requiring future hires to contribute half the cost of their pensions, and requiring voter approval for pension increases.
The Mercury News explains that key to pushing the measure has been the explosion in the amount of San Jose's budget taken up by pension costs:
[San Jose Mayor Chuck] 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.
In San Jose, the measure passed with 71 percent of the vote. In San Diego their reform measure passed with 67 percent of the vote. San Diego's measure would shift all new hires (except police) into 401(k) programs instead of pensions and would put a five-year freeze on the portion of current employees' salaries used to calculate pensions. Unions are planning to sue there, too. Via the San Diego Union-Tribune:
Labor unions, which strongly opposed the measure, say Proposition B is illegal and will be tossed out by courts. They contend the mayor violated labor law by using his position to advance the initiative and avoid required negotiations with employee unions.
Frank De Clercq, head of the city firefighters union, said the initiative also ignores many of the concessions that workers have made in recent years, including a 6 percent compensation cut and reducing the value of taxpayer-funded health care benefits they receive upon retirement. He said he wasn't surprised by the results but noted a legal challenge will be made.
Regardless of the union concessions, San Diego faces a $2.2 billion pension deficit. Given the significant number of voters turning against them, surely the unions must realize that trying to push for more tax increases on these very same people to make up the gaps just isn't going to work out for them. Right? Are they going to keep blaming it on millionaires when two-thirds of their own community is voting against them?