San Jose mayor leads in bid to ease statewide pension costs

By Nicel Jane Avellana

Nov 29, 2013 04:14 AM EST

San Jose, California Mayor Chuck Reed is spearheading a statewide voter initiatiative that will pave the way for changes to be made in the future pension plan benefits of current employees.  According to a Bloomberg report, the city of San Jose was compelled to make steep reductions in basic services due to the skyrocketing costs of its retirement plans. From only USD 73 million in 2002, the costs went up to USD 245 million last year. Reed said the city's pension and retiree healthcare liability is nearly USD 3 billion.

In an interview with Bloomberg, Reed said, "The statewide measure allows us to begin to deal with the cost of skyrocketing pension and retiree health-care costs. If you look at what we've done so far, it doesn't solve the problem."

Last year, voters in San Jose approved changes in the retirement plans, which required newly-hired employees to shoulder 50% of the total cost of the plan, which was two times paid by current employees. Those who are already part of the city's payroll may still be able to hold on to their existing plans provided that they ramp up their contributions. If they want to keep their costs at the same rate, they may opt for a plan that gives more modest benefits, the report said.

Unions, however, were not too happy with the change and have filed a case to block it. The case is still pending in court.

California School Employees Association Executive Director Dave Low said about Reed's statewide initiative, "What they're trying to do is overturn decades of case law, Supreme Court decisions and change the California constitution to allow public employers to either change, cut or eliminate public employees' pensions in the middle of their career." Low is also the Chairman of Californians for Retirement Security, which is coalition of public employees and retirees.

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