2 California Cities Voters Embrace Pension Cuts

Published: June 6, 2012 at 11:45 AM ET - New York Times

SAN DIEGO (AP) — Voters in two major California cities overwhelmingly approved cuts to retirement benefits for city workers in what supporters said was a mandate that may lead to similar ballot initiatives in other states and cities buried under mounting pension obligations.

Public employee unions that aggressively fought the measures weren't able to overcome the simple message supporters used to attract voters in San Diego and San Jose: Pensions for city workers are unaffordable and more generous than many private companies offer. The result is reduced public services in the form of such things as limited hours at public libraries and unfilled potholes.

"The public is frustrated," said San Diego Councilman Carl DeMaio, a Republican who staked his mayoral bid on the pension measure and advanced to a November runoff in Tuesday's election to lead the nation's eighth-largest city.

In San Diego, two-thirds of voters favored Proposition B while the landslide was even greater in San Jose, the nation's 10th-largest city. With all precincts counted, 70 percent were in favor of Measure B.

"The voters get it, they understand what needs to be done," said San Jose Mayor Chuck Reed, a Democrat who has called pension reform his highest priority.

Shrinking tax revenues during the recession are also responsible for service cuts in San Diego and San Jose, but pensions were an easy target. San Diego's payments to the city's retirement fund soared from $43 million in 1999 to $231.2 million this year, equal to 20 percent of the city's general fund budget, which pays for day-to-day operations.

As the pension payments grew, San Diego's 1.3 million residents saw roads deteriorate and libraries and recreation centers cut hours. For a while, some fire stations had to share engines and trucks. The city has cut its workforce 14 percent to 10,100 employees since Mayor Jerry Sanders took office in 2005.

San Jose's pension payments jumped from $73 million in 2001 to $245 million this year, equal to 27 percent of its general fund budget. Voters there approved construction bonds at the beginning of the last decade, but four new libraries and a police station have never opened because the city cannot afford to operate them. The city of 960,000 cut its workforce 27 percent to 5,400 over the last 10 years.

Tuesday's votes set the stage for potentially lengthy legal challenges by public employee unions. The measures are unusual because they address pensions for current employees, not just new hires.

Opponents say the measures deprive workers of benefits they were counting on when they got hired. Some workers decided against potentially more lucrative jobs with private companies, figuring their retirement was relatively safe.

Those arguments failed to resonate with voters.

"A lot of employees are disheartened," said Yolanda Cruz, president of the San Jose Municipal Employees Federation, who called the outcome disappointing. "We've been made the full problem of what's been going on."

The ballot measures differ on specifics. San Diego's imposes a six-year freeze on pay levels used to determine pension benefits unless a two-thirds majority of the City Council votes to override it. It also puts new hires, except for police officers, into 401(k)-style plans.

More than 100,000 residents signed petitions to put the San Diego measure on the ballot.

Under San Jose's measure, current workers have to pay up to 16 percent of their salaries to keep their retirement plan or accept more modest benefits. New hires would get less generous benefits.

Reed joined an 8-3 City Council majority to put the measure on the ballot. He said after Tuesday's vote that he expected other cities in financial binds to pursue similar measures.

"It's novel but it's certainly not radical," he said. "Mayors across the country are very interested. We're at the leading edge but we're not alone."