How San Jose, San Diego pension measures have fared

SETTING THE RECORD STRAIGHT (publ. 9/25/2015, page A4)
A story about local pension measures in San Jose and San Diego should have clarified that there is some dispute whether a proposed statewide pension initiative could affect current workers as well as future hires. The authors of the initiative say they are not targeting current workers and are revising the initiative’s language to clarify that.

SAN JOSE — On the same June 2012 Election Day, California’s second- and third-largest cities — chic beachfront San Diego and high-tech hub San Jose — made national headlines when voters overwhelmingly approved sweeping measures to trim municipal retirement benefits whose mounting costs were devouring their budgets.

The two cities took very different approaches, and the debate continues over which city has had more success — and whether either could serve as a model for statewide reform.

Seeking bigger and more immediate relief from its soaring pension bills, San Jose’s Measure B targeted its current as well as future workforce, including cops. With its police department depleted by an officer exodus, city leaders now are moving to replace the voter approved pension cuts with a union-negotiated settlement.

San Diego, meanwhile, soldiers on with its Proposition B reforms largely targeting new hires — with the notable exception of police — despite ongoing union efforts to overturn them and complaints that they hurt recruitment.

As it stands today, San Jose officials say the pension settlement, when approved by all the city unions and a judge, will deliver most of the nearly $25 million near-term annual savings from the parts of the measure that a judge left standing. They say it will save $1.7 billion over 30 years from the settlement with police and fire unions.

San Diego officials say Proposition B is saving about $40 million a year at the moment and will deliver nearly $1 billion in relief over 30 years.

City officials say the difference in near-term and long-term savings between San Diego and San Jose is due to the different approaches the two cities have taken.

Both cities also have suffered recruitment troubles since the reform measures passed. San Jose today has about 500 of its budgeted 5,900 positions unfilled, including 167 in the police department. San Diego officials said 792 of the city’s estimated 11,000 positions are unfilled.

Josh Rauh, a pension reform scholar at Stanford University’s Graduate School of Business, said San Diego took the more politically palatable approach by targeting new hires and that’s primarily why the measure lives on while San Jose’s is being replaced.

“San Diego’s pension reform initiative in 2012 ultimately achieved more because it doesn’t look like it’s going to be rolled back,” Rauh said. “The fact that they left out current employees and police gave it a greater chance of surviving.”

But it’s not all good news for San Diego either. Leaving out two of the largest groups — cops and current workers — limited the scope of savings and could mean the city will have to revisit pension reform again, Rauh said.

Dan Pellissier, president of California Pension Reform, said the two measures sent an important message to Sacramento, where lawmakers later adopted milder statewide reforms, that voters want action.

“What we we’ve learned from San Diego and San Jose is the awareness of pension problems is relatively low,” Pellissier said, “but once voters get educated and engaged, they know change is needed.”

Government employee unions, however, say the measures only led to costly legal feuding and staffing shortages.

“San Diego has seen many of the same impacts as San Jose — employees have left and people don’t want to work there anymore,” said Dave Low, chairman of Californians for Retirement Security, a group that represents government worker unions. “I think the biggest lesson is that these two cities have unilaterally proposed something that’s created nothing but tension and strife.”

San Jose’s Measure B, approved by nearly 70 percent of city voters, reduced pensions for new hires without eliminating them, struck a costly retiree perk, raised the bar for disability retirements and called for current employees to either pay more for their pensions, reduce them or take pay cuts.

San Diego’s Proposition B, approved by about 65 percent of city voters, froze employee pay that counts toward their pensions for five years and put all new hires — except for police recruits — on 401(k)-type retirement plans like those typically offered to workers at private companies.

By going after current workers’ pensions, San Jose was taking on a California court doctrine that has effectively rendered government worker pensions untouchable once they’re hired, making those savings more legally vulnerable.

San Diego left current workers’ pension formulas alone, while making more aggressive cuts to most future employees’ retirement that would lower costs over time. By exempting police recruits, the city tried to avoid a police recruitment problem at a time when cities are competing for cops.

Both measures met a legal blitz from government unions. A trial court blocked the San Jose measure’s cuts to current worker pensions — worth about $50 million a year in savings.

San Diego’s initiative withstood three legal challenges to keep it off the ballot, but an ongoing legal battle over whether the former mayor failed to bargain with unions before going to voters lives on.

While San Jose and San Diego garnered national attention for their pension reforms, other cities have been slow to follow suit. Ventura County officials tried to place a San Diego-like measure before voters last fall, but a trial court judge blocked it on technical grounds that a state law governing the county’s pension system doesn’t permit voters to make changes.

Today, the chief pitchmen for the two cities’ measures, former San Jose Mayor Chuck Reed and former San Diego Councilman Carl DeMaio, are teaming up on a proposed statewide pension initiative that, like the San Diego measure, targets future rather than current workers.

One expert scoffed at the idea that either the San Jose or San Diego model could provide statewide solutions.

“Neither one of these plans is going to move the needle on a statewide referendum,” said Stanford public policy lecturer David Crane. “You don’t need a referendum, you need a governor and Legislature who will address this in a serious manner.”

Staff reporter Thomas Peele contributed to this report. Follow Ramona Giwargis at Twitter.com/ramonagiwargis or contact her at 408-920-5705.