SAN JOSE -- Six months after San Jose voters overwhelmingly approved sweeping pension reforms, city leaders cite some progress on changes to shrink yearly retirement bills devouring funds for services, but the biggest battles still lie ahead for the coming year.
"We're certainly moving ahead," said Mayor Chuck Reed, who has staked his legacy on his Measure B pension reforms that won nearly 70-percent voter approval in June while acknowledging "there's a lot of work yet to be done."
While San Jose leaders try to enact the pension reforms over union lawsuits, they also face blowback as some key, highly trained workers -- chiefly cops and wastewater plant workers -- bolt for better-paid jobs, worsening staffing
That exodus has sharpened the cries of critics who had urged Reed to abandon the ballot measure in favor of a negotiated deal with the city's labor unions and another tax increase. They argue what progress has been made on pension changes -- mostly for new hires -- is overshadowed by legal bills to defend Measure B. The City Council this month set aside $1.2 million for contract lawyers handling the fight.
"We're throwing money we desperately need at a political fight that ultimately is going to cost us dearly as a city," said Councilman Ash Kalra. "I don't think we can ignore anymore the depletion of city services to desperately low levels and the scary increase in crime in our neighborhoods."
Despite the dispute
San Jose's employee retirement costs have more than tripled, gobbling funds for staff and services from police protection to libraries and road maintenance, even as city leaders cut pay 10 percent to limit layoffs.
Unions argue the city could have saved more money already by accepting pension concessions they offered.
But Reed said union offers mostly cut pensions for future hires and would not deliver meaningful savings through staff turnover for years. Projected retirement cost increases would meanwhile devour revenue from a proposed tax increase, he said. And Measure B's new-hire pension cuts went farther than what unions offered, making employees pay half the plan's total cost and affirming the city can make future changes.
Since September, some 50 new hires now work for San Jose under such a plan, with higher retirement ages, lower benefit formulas and smaller costs, and the city expects to add many more.
The city also is still working on the new disability retirement limits the measure called for, which officers say go too far.
And the biggest issue -- whether San Jose can force current employees to pay more for their pensions unless they choose a cheaper plan for their remaining years on the job -- awaits court decisions on union lawsuits arguing such a move would violate their "vested rights."
Reed called that the "central part of the pension reform provisions," noting that reducing pay or pensions for current employees is "where the most serious amount of money is."
The city also has yet to secure federal permission to let current workers choose a cheaper, less generous pension for their remaining years to avoid the increased pension payments called for in Measure B. Reed has made several trips to Washington, D.C., seeking IRS approval.
City officials the day the measure was decided in June filed suit in federal court seeking a declaration that it is allowable under U.S. contract law. City unions filed lawsuits the following day in state Superior Court arguing the measure violates state protections for public worker pensions.
After losing a bid over the summer to suspend the state court lawsuits while the city's federal case is decided, San Jose officials dropped the federal case. The state lawsuits have been consolidated, and the city plans to pursue its federal claims along with them.
Those cases are expected to be heard early next year before Judge Patricia M. Lucas, a UC Berkeley law school graduate who practiced complex civil litigation for more than 20 years before joining the bench in 2003. Whatever her decision, appeals are almost certain.
Gregg Adam, a lawyer for the police union, said San Jose is paying lawyers who continue losing similar arguments on vested pension rights in cases around the state, most recently in Redding.
"We're six months into it, and they haven't saved a dime," Adam said. "In the meantime nothing's getting done to fix a problem both sides acknowledge is a problem."
But Reed said he's "optimistic" about the city's chances, arguing that Gov. Jerry Brown signed pension reforms this year that also call for current employees to pay more toward their pensions, which "speaks to whether it's legally defensible, and I think it is."
And if judges disagree?
"We go back to laying people off," Reed said, "and cutting pay."
Contact John Woolfolk at 408-975-9346. Follow him on Twitter at Twitter.com/johnwoolfolk1.
Facts about San Jose's pension reform Measure B: