San Jose Declares Fiscal Emergency to Cut Workers’ Retirement Benefits

On Friday, May 13th, San Jose Mayor Chuck Reed released a memo calling for a Fiscal and Public Safety Emergency to “gain control over skyrocketing retirement costs.”  In the memo, Reed announced his plan to place a measure on the November ballot that would dramatically cut City workers’ retirement benefits.  Vice Mayor Madison Nguyen and Councilmembers Sam Liccardo and Rose Herrera also signed on to the proposal.

Reed’s proposal ignores legal requirements to protect vested benefits and drastically cuts retirement benefits for past, current, and future City workers.  Among other things, he calls for:

New employees

  • Increasing the vesting eligibility for retiree health benefits to 20 years of service
  • Requiring retirees to cover at least 50 percent of their health care costs
  • Raising the retirement age to 65 for non-sworn and 60 for sworn
  • City to pay between 6.2 and 9 percent of employee’s base salary into second-tier retirement plan

Current employees

  • Moving forward, pension benefits will accrue at 1.5% per year of service
  • Raising retirement age each year by six months until minimum age of 65 for non-sworn and 60 for sworn is reached
  • Increasing the vesting eligibility for retiree health benefits to 20 years of service
  • Requiring retirees to cover at least 50 percent of the health care cost

Current and future retirees

  • Slowing COLA to Bay Area CPI or 1%, whichever is lower

Additional measures

  • Employees will cover half of the cost of the retirement unfunded liability
  • If there’s ever an unfunded liability, bargaining unit employees will receive no raises

Local 21 Leaders and Staff believe Reed’s proposal is based on incomplete data and analysis, and in many instances violates the law as it pertains to legally protected vested benefits.

Local 21 Leadership and Staff have been working with our legal, political and actuarial consultants on a strategy to combat the recommendations being pushed by the Mayor and Manager.

It is important to note that Local 21 is ready to have an open and honest dialogue with the City to find a fact-based, equitable solution that curbs rising retirement costs and preserves vital City services.

It has been 203 days since San Jose voters approved Measure W and 119 days since the City Council directed City Administration to work with our bargaining unit on pension reform ideas.  However, the City has not scheduled a single bargaining session with Local 21 to find a solution.  Local 21 Leaders are calling on the City to come to the table instead disregarding decades of legal rulings and precedent to strip away vested retirement benefits.