Looking for a trend in Tuesday's election? Look no further than pension reform results in San Diego and San Jose. As the Legislature dithers, fed-up voters in the state's second- and third-largest cities overwhelmingly approved ballot measures that roll back benefits for current and future city workers.
The measures go further than anything union-friendly Democrats who control the Legislature are considering. They go much further than the modest pension reform plan that Gov. Jerry Brown has advanced, a plan that's languishing in a joint Assembly-Senate committee.
Measure B in San Jose was the most politically significant because the South Bay city is a union town and Democratic Party stronghold.
Mayor Chuck Reed, who championed Measure B, is a Democrat. Despite strong labor opposition, city voters approved it with a whopping 70 percent of the vote.
The San Jose measure allows current workers to keep the retirement benefits they have already earned, but to continue accruing benefits at the same level workers would have to contribute more of their own money, as much as 16 percent of salary. Alternatively, current workers could elect to enroll in a less generous retirement plan with a higher retirement age. Future hires would receive an even lower level of guaranteed benefits plus Social Security and a 401(k)-type retirement benefit.
In San Diego, 66 percent of voters approved Proposition B. It would freeze the amount of pay used to calculate retirement benefits for current workers. It would do away with guaranteed pensions entirely for most future workers. With the exception of police, San Diego city employees hired after the effective date of Proposition B would be enrolled in a defined benefit or 401(k)-type plan.
Like many local and state governments, San Diego and San Jose are paying out more and more in pension benefits each year. Those benefits now eat up roughly 20 percent of general fund spending in both cities. Payouts for pensions in San Diego rose from $137 million in 2006 to $231 million this year. San Jose pension costs zoomed from $73 million in 2001 to $245 million this year. To help pay those higher costs, both cities have had to lay off police officers and other city employees, close firehouses, reduce library hours and cut maintenance of parks and streets.
Predictably, public employee unions have filed lawsuits in both cities, arguing the reform measures violate vested retirement rights of workers and interfere with their collective bargaining rights.
In the past, courts have been highly protective of pensions, particularly for current workers. Both cities claim their measures have been carefully crafted to avoid running afoul of state law or the constitution. Struggling municipalities across the country are watching closely to see how the courts respond.
But even if unions win in court, they lose. Generous public employee pensions approved in good times are simply unsustainable, both politically and economically. Increasingly, taxpayers are unwilling to fund a retirement system that allows most public workers to retire at age 55 with generous pensions and cost-of-living increases on top of that. Voters have become even more incensed as they watch their government services shrink at the same time. Finally, as they face layoffs, furloughs and pay cuts, even younger public employee union members are beginning to balk.
The message from voters in San Jose and San Diego could not have been more clear. They want pension reform. Gov. Brown certainly heard them, saying, the day after the vote, that reform was "imperative." If labor unions want to head off an eventual ballot initiative that goes far beyond what Brown has proposed, they should cut a deal with him.