By Khalida Sarwari
San Jose Mayor Chuck Reed released a proposal today to save the city from a fiscal emergency some fear will result in cuts to city services and the loss of hundreds of jobs.
Reed proposes reining in retirement costs, which he said are “skyrocketing” and contributing to the city’s $115 million budget deficit.
San Jose has billions of dollars in unfunded liabilities for retirement benefits that have increased the city’s annual retirement costs from $63 million in 2000 to $250 million this year.
The costs are projected to rise to $400 million by 2016, and could be closer to $650 million after actuarial adjustments.
The deficit will likely force the city to eliminate 195 sworn police positions and 64 firefighter positions as well as reduce library service to three days a week.
Reed’s proposal calls for setting limits on retirement benefits for new employees, current employees and retirees.
The limits include capping the city’s contribution to retirement benefits for new employees at nine percent of base salary and 50 percent of the total cost.
Another limit would be to raise the age at which employees can receive full retirement benefits to 60 for sworn public safety employees and 65 for all other employees.
Reed proposed raising the eligibility for retiree health care benefits to 20 years of service, and limiting the pension accrual rate for current employees to 1.5 percent per year for any future years of service.
His plan also calls for limiting the cost of living adjustment to a maximum of one percent per year and restricting bonus pension payments to retirees.
Additional temporary limits would be instituted on employee benefits until city services are restored to Jan. 1 levels or if the retirement plans experience new unfunded liabilities.
“This is a declaration that we have a problem and that we’re going to solve that problem. This is one way to do it that we think is reasonable, but we’re still open to conversations,” Reed said this afternoon at a news conference.
Reed’s proposal builds on City Manager Debra Figone’s fiscal reform plan, which was designed to generate enough savings over the next five years to eliminate the city’s structural budget deficit, restore essential services that would be cut this year and reopen the city’s vacant libraries, community centers, fire stations and police substations.
Her plan identified nearly $270 million in potential savings, including about $216 million that could be achieved just through retirement system reform.
The recommendations would have to win approval by voters as many of them require changes to the city charter.
The full proposal can be found online at http://www.sanjoseca.gov/mayor/news/memos/11May/FiscalReforms_05132011.pdf.