While unions oppose key parts of Gov. Brown’s 12-point pension reform plan in the Legislature, local officials say union allies are using state agencies to try to derail or undermine local pension reforms on the June ballot in San Jose and San Diego.
The widely watched local measures, going beyond the governor’s plan, would cut pension benefits promised current workers, something now mainly limited to new hires. Major court battles are likely if voters approve the potentially trendsetting measures.
A legislative committee yesterday approved a request by Assemblyman Jim Beall and a half dozen other San Francisco Bay area Democratic legislators to have the state auditor probe San Jose pension costs.
At a city hall news conference Monday, Beall reportedly urged the city council to delay a vote Tuesday on a revised pension reform ballot measure until the audit is completed and the Legislature acts on pension reform.
The council voted 8-to-3 Tuesday to place the revised pension reform on the June ballot, broadening a 6-to-5 vote in December. The two who switched, Nancy Pyle and Don Rocha, told union members in the audience San Jose residents want pension reform.
There were shouts of “liar” from the audience and other references Tuesday to Mayor Chuck Reed’s early warning that annual pension costs could reach $650 million by 2015, an estimate since scaled back to $400 million and then $300 million.
Mayor Reed
Reed said $650 million was a worst-case estimate, cited along with the $400 million estimate, that was not used in labor negotiations. He emphasized Tuesday that city retirement costs this year are $245 million, up from $73 million 10 years ago.
Unions said in an ethics complaint the $650 million estimate was used to obtain labor concessions. Unions also filed a complaint with the U.S. Securities and Exchange Commission contending that omitting the worst-case estimate misled city bond buyers.
One speaker Tuesday said directly, while others made allusions, that the local NBC television station, which aired the first story criticizing the $650 million estimate, and the San Jose Mercury News newspaper have very different views of the issue.
The television station reported that Beall’s audit request “comes after an NBC Bay Area investigation found Mayor Chuck Reed may have used an exaggerated five-year pension projection to sell pension reform as a ballot measure.”
A Mercury News story on the audit quoted Reed: “Our city hall unions know very well that there is strong voter support for pension reform. They’re doing everything they can to keep it off the ballot. And they have a lot of friends in the state Legislature.”
The president of the largest city worker union, Yolanda Cruz of AFSCME Local 101, told the council her union has been “scapegoated” for not participating in negotiations. She said she challenged the pension numbers more than a year ago.
“We could not get confirmation on how the numbers were achieved — what data was used, how it was calculated and why it was using projections that were overstated at best,” Cruz said.
Yolanda Cruz
A Mercury News editorial this week said Reed got the $650 million estimate from a city retirement director at a council meeting a year ago. But council decisions are based on official projections by independent actuaries and the two city pension boards.
The editorial said the run-up to the vote Tuesday “has devolved into a three-ring circus — with the clown imported from Sacramento, where Assemblyman Jim Beall wants a legislative committee to audit San Jose’s pension system for purely political purposes.”
In San Diego, city attorney Jan Goldsmith said the state Public Employment Relations Board is trying to block a pension reform initiative placed on the June ballot by gathering 116,000 voter signatures.
“Labor unions, vowing to fight by all means, sought help from a former labor activist now serving as general counsel of PERB,” Goldsmith said in an op-ed article last week in the U-T San Diego newspaper, referring to Suzanne Murphy.
After a judge refused a PERB request to block the initiative from the ballot, said Goldsmith, the board scheduled a hearing April 2 in Glendale to pursue an administrative process aimed at preventing the city from enacting the reforms if voters approve them.
He said the board argues that since the initiative is backed by Mayor Jerry Sanders (not a formal proponent) it’s a city-sponsored measure. Thus union negotiations were required first and then a city council vote to determine if the reforms go on the ballot.
“Never in the history of California has there ever been a requirement to negotiate with labor unions over terms of a citizens’ initiative placed on the ballot by voter signatures,” Goldsmith said in the article.
He cited Gov. Brown’s support for a tax initiative as an example of how governors and mayors have a a long tradition, and constitutional right, of advocating for and against initiatives.
The San Diego initiative would give new city hires a 401(k)-style retirement plan instead of a pension. For current workers, the amount of their pay used to calculate pensions would be frozen for five years.
Goldsmith said the city charter allows changes in “pensionable” pay if done properly. He has filed a lawsuit in an attempt to enforce a charter provision calling for “substantially equal” pension contributions by the city and its employees.
New unopened San Jose police substation
One of four new unopened San Jose libraries
In San Jose, the ballot measure would place new city hires in a retirement plan with lower costs and benefits based on Social Security and a plan that may or may not combine a pension with a 401(k)-style plan. The details would be negotiated with labor.
Brown’s plan would place new hires in a similar “hybrid” plan. But unions don’t like the risk of the 401(k)-style part. And experts say costs for the old pension plan will go up as it’s phased out and switches to less risky and lower-yielding investments.
The San Jose measure gives current workers the choice of the new plan or paying more to continue in the old plan, up to 4 percent of pay a year until reaching a total of 16 percent or half the long-term cost of paying off a $3 billion unfunded pension liability.
If current workers choose the new plan with lower costs and benefits, pension amounts already earned under the old plan would not be cut. Reed said the city charter and municipal code allow the city to raise the pension contributions of current workers.
San Jose is in deep financial trouble. About 20 percent of its general fund is spent on retirement costs, far above the 4 to 5 percent common among government employers reported by a governor’s commission early in 2008.
The city contribution to police and firefighter pensions is equal to about 50 percent of their pay. In comparison, the state contribution for the Highway Patrol is about 31 percent of pay.
City workers have received a 10 percent cut in pay. The workforce has been cut by 2,000 during the last decade to 5,400, a 27 percent reduction. Hundreds of police have been cut along with four fire engine companies and one truck company.
Street, sidewalk and park maintenance have been cut along with park rangers, gang and crime prevention and youth and senior services. The city has been unable to open a new $90 million police substation and four new libraries built with bond money.
“San Jose has become a leader in dealing with skyrocketing retirement costs that threaten local governments all over this state,” Reed said Tuesday. “We have been a leader because we were forced to due to the impact on our city of skyrocketing costs.”
Reporter Ed Mendel covered the Capitol in Sacramento for nearly three decades, most recently for the San Diego Union-Tribune. More stories are at https://calpensions.com/ Posted 8 Mar 12
Calpensions 
March 8, 2012 at 3:47 pm
Those pesky Republicans on the Joint Legislative Audit Committee carrying the water of unions again…Seriously? The issue of pension reform is not the question, the issue of truth and lies is the issue. It was a bipartisan vote to conduct the State Audit and it was a 12-1 vote to expedite it.
See the factual report here:
http://www.nbcbayarea.com/news/local/State-Audit-for-San-Jose-141790793.html
And here:
http://www.mercurynews.com/bay-area-news/ci_20123419/state-lawmakers-order-san-jose-pension-audit
Fact: 5 San Jose unions proposed pension reform that would have rolled back benefits to 1970’s levels, well before former Assemblymember Joe “Revisionist History” Nation voted numerous times for increased pension benefits when he was in the legislature.
Myth: The $650 million dollar San Jose Pension Projection did not enter into the negotiations over pension reform. To the contrary, several letters from Deputy City Manager Alex Gurza reference as the only proposal to unions being the Mayor’s May ballot measure language from a Memo dated May 13, 2011—That memo is chock full of the, drum roll please…..$650 million dollars figure. The number was used in negotiations and the depositions and lawsuits will validate this.
Fact: Police and Fire unions offered a written guarantee that if their pension savings projections were not met they would make the difference up by taking across the board pay cuts. Legal and lawful pay cuts. Those unions voted overwhelmingly to back that proposal and take away the city argument that there was no guarantee of savings. The city rejected this offer.
Myth: Mayor Reed said that the $650 projections was a worse case scenario. Not true: In the book “Boomerang” he says it is a “mathematical inevitability”. In the May 21, 2011 edition of the New York Times he says, “most likely” to happen. There are over 50 instances where the Mayor used $650, including required city budget docs, memos, and letters; yet the city can not produce any back up for the number that the Retirement Director Russell Crosby says came off the top of his head. We have offered to pay for a CT Scan to see what else in Russell Crosby’s head.
Fact: The actual pension cost projection for 2015-16 is not $650, never was $431, and it isn’t $400….the number is $308 million…still a large sum of money but we recognized that and made substantial offers, with guaranteed savings, that would have drove that number down substantially. It was never enough for the city and Mayor Reed.
Myth: That the city is on firm legal ground to break contracts and dismantle 70-years of accepted California court doctrine regarding vested rights. The very same hucksters selling their “beat down public employees” game plan to the City are the very same lawyers that just lost a unanimous decision in the California Supreme Court when they tried to hose retired Orange County seniors out of their vested health care benefits. The same hucksters that lost in arbitration in Stockton and advised that city to declare bankruptcy instead of negotiating in good faith with their workers and spending taxpayers dollars wisely. Why, ummmm….let’s see….can you say BILLABLE HOURS.
Fact: The current San Jose ballot measure will take away public safety’s ability to get the same disability benefit that current Councilmember Pete Constant is relying on to support his family. Yes, he has a disability retirement from the city and works as a councilmember and he voted to make sure anyone that has the same injury as he has won’t get the same benefit. In fact if a cop of firefighter gets hurt on the job and they can not perform as a cop or firefighter because of injury and there is not another non-front line job available in their respective department then guess what…they get nothing, on the street, out of work and not disability income.
Enjoy your day!
March 8, 2012 at 3:53 pm
My bad, I forgot to mention that just a couple of months ago the City of San Jose’s Mayor wanted to declare a “State of Fiscal Emergency” and he projected the budget deficit to be $80-100 million dollars.
Last week, miraculously, the City announced that there was no deficit….that there was now a budget surplus of $10 million dollars. Wow, what a swing.
Yet another reason 12 State legislators voted to expedite an audit of how San Jose conducts its financial affairs…Whether using an abacus, calculator, slide rule, or pinto beans for those telling the truth 2+2 will always =4… but for some in San Jose 2+2= whatever they want it to.
Bring on the audit and bring on the truth.
March 8, 2012 at 4:59 pm
Wow! Clearly Mr. beall is a demonstrated liar. what is so sad about that is that now this strategic lie is national news. No one wants to see a so called pension reformer in a huge lie about the so called unfunded piece because it undermines any of the frankly good ideas thease reformers have had.
Looks to me that the fire and police in SJ have made very reasonable offers and coupled with correcting the former false numbers given by the city, the whole thing could’ve been solved! Beall and his now infamous numbers have set progress back— just sad.
March 8, 2012 at 5:24 pm
Oh Tom, the jig id UP buddy, your scam is over.
Let the VOTERS decide lil buddy, what are you AFRAID OF??????
This is a democracy, the people decide, and they have decided your gravy train scams are through with.
So i say get with the program because changes, they are a coming.
March 8, 2012 at 5:26 pm
COLA LAWSUIT VICTORY IN FLORIDA! – FLORIDA JUDGE: IT’S ILLEGAL TO TAKE EVEN FUTURE COLA ACCRUALS FROM EMPLOYEES, LET ALONE COLA BENEFITS THAT HAVE ALREADY BEEN EARNED AND ACCRUED (SEE: COLORADO GENERAL ASSEMBLY, SB1.)
The Florida Legislature attempted pension reforms that were not nearly as aggressive, in terms of risk of unconstitutionality, as those adopted by the Colorado General Assembly. Nevertheless, the Florida Legislature has been smacked down by the courts.
Here are some noteworthy portions of the Florida ruling:
“This court cannot set aside its constitutional obligations because a budget crisis exists in the state of Florida. To do so would be in direct contravention of this court’s oath to follow the law.”
“To find otherwise would mean that a contract with our state government has no meaning.”
“There was certainly a lawful means by which they could have achieved the same result.”
“Florida law is clear that a legislature can, as part of its power to contract, authorize a contract that grants vested rights which a future legislature cannot impair.”
“The elimination of the future COLA adjustment alone will result in a 4 to 24% reduction in the plaintiffs total retirement income. These costs are substantial as a matter of law.”
“Where the state violates its own contract, complete deference to a legislative assessment of reasonableness and necessity is not appropriate because the state’s self-interest is at stake.”
“All indications are that the Florida Legislature chose to effectuate the challenged provisions of SB 2100 in order to make funds available for other purposes.”
“If a state could reduce its financial obligations whenever it wanted to spend the money for what it regarded as an important public purpose, the Contract Clause would provide no protection at all.”
“The Takings Clause is intended to prevent the government from forcing some people alone to bear public burdens, which in all fairness and justice should be borne by the public as a whole.”
“Defendants are further ordered to reimburse with interest the funds deducted or withheld . . . from the compensation or cost-of-living adjustments of employees who were members of the FRS prior to July 1, 2011.”
Here’s a link to the decision in Florida:
http://judicial.clerk.leon.fl.us/image_orders.asp?caseid=49809133&jiscaseid=&defseq=&chargeseq=&dktid=87117441&dktsource=CRTV
Here’s hoping that one day Justus will prevail in Colorado.
March 8, 2012 at 5:26 pm
Yet another reason 12 State legislators voted to expedite an audit of how San Jose conducts its financial affairs…Whether using an abacus, calculator, slide rule, or pinto beans for those telling the truth 2+2 will always =4… but for some in San Jose 2+2= whatever they want it to.
Tome, no more will 2+2= $250K comped GED level cop and firewhiner jobs with $5-$10 million pensions in San Jose, you can take that to the bank lil buddy 🙂
March 8, 2012 at 5:39 pm
The most elemental maxim of jurisprudence is this: promises made must be kept.
The City of San Jose has a well established pension system that differentiates the burdens of cost, provides disability benefits in line with the market, and cost of living adjustments for retirees.
These are vested benefits under law.
By its ballot measure, however, the City is gambling millions of dollars, both in attorneys fees and in pension contributions, on an admittedly untested legal position that existing vested pension benefits may be reduced.
It is easy for the Mayor and his allies to take such a risk; not so for the citizens and employees of San Jose.
Moreover, just when economic recovery begins to shake loose development projects and increased commerical activity, we can expect senior experienced and mid-level employees to either retire,if possible, or leave for employment elsewhere. This institutional collapse of a talented and dedicated workforce serves no one.
The offers made by labor organizations provided tens of millions of dollars in guaranteed savings. In addition, unlike most other plans, the City’s refusal to consider extension of the amortization period of its pension liabilities helps create the spectre of an unsustainable crisis, where one can be avoided. For example, most plans operate under a amortization period of 25-30 years, where San Jose is much shorter at 16-20 years. This makes the cost challenge created by the Wall Street collapse appear difficult at best.
Make no mistake about it, the action this week by Mayor Reed and his allies shows that power, not reason or responsibility, is the coinage of his administration.
March 8, 2012 at 6:33 pm
Christopher E. Platten Says:
The most elemental maxim of jurisprudence is this: promises made must be kept.
Taxpayers never made any “promises” to make GED educated San Jose employees multi millionaires at age 50 Chris, no one did.
Face it dude, your jig is up, deal with it. 🙂
March 8, 2012 at 6:36 pm
The offers made by labor organizations provided tens of millions of dollars in guaranteed savings. In addition, unlike most other plans, the City’s refusal to consider extension of the amortization period of its pension liabilities helps create the spectre of an unsustainable crisis, where one can be avoided. For example, most plans operate under a amortization period of 25-30 years, where San Jose is much shorter at 16-20 years.
Oh boy, more torugh feeder spin to shoot down.
Chris, MOST plans, as in ALL plans, except culTURES, use a 3-5 year window for amortization, not 30.
Why do you clowns lie so much???????????? NO ONE uses a 30 year period to amortize debt. Pension debt Si not a mortgage, the services you provide today-including pensions payments-need to be PAID today, not in 30 years when the work is 30-60 years in the past.
March 8, 2012 at 6:46 pm
The voters don’t get to decide constitutional matters, Rex. We have Judges, for that.
March 8, 2012 at 6:51 pm
You have largely spent your time, crying and whining about nepotism and cronyism, in the public sector, Rex. Why aren’t you whimpering over the fact that the Mayor of San Jose, is the brother-in-law of the CEO, at the Mercury News? Oh, forget that–its the private sector.
March 8, 2012 at 7:01 pm
Rex, I guess you missed, the part in your civics class, where you would have learned we live in a Constitutional Republic, and we have representatives, that are elected to make decisions for us. The average voter doesn’t know and doesn’t care, squat, about what is going on here.
March 8, 2012 at 7:12 pm
Allgernon, Christopher and Tom— Poor rex the poodle has no understanding of any law related concepts—– your posts while spot on, are lost on the little fella! LOL But God Bless him!!
March 8, 2012 at 7:54 pm
Quoting …”The city contribution to police and firefighter pensions is equal to about 50 percent of their pay. In comparison, the state contribution for the Highway Patrol is about 31 percent of pay.”
Since Taxpayers (85% of whom are PRIVATE Sector workers) pay 80-90% of total pension costs, the appropriate standard of comparison for what is a “reasonable” % of pay that should be allocated for pensions, should NOT be what other Civil Servants get, but what is typical for Private Sector Taxpayers.
Per the US Gov’t, that % of pay is typically about 6% …. NOT 31%.
What make Civil Servants so “special” at Taxpayers’ expense ?
Taxpayers must refuse further funding of these excessively generous pensions.
March 8, 2012 at 8:02 pm
Lover— You’d love it if your fake stats were true! LOL You would get along pretty well with the math that the Mayor is doing!
March 8, 2012 at 9:14 pm
Tough Love Says:
March 8, 2012 at 7:54 pm
Quoting …”The city contribution to police and firefighter pensions is equal to about 50 percent of their pay. In comparison, the state contribution for the Highway Patrol is about 31 percent of pay.”
Since Taxpayers (85% of whom are PRIVATE Sector workers) pay 80-90% of total pension costs, the appropriate standard of comparison for what is a “reasonable” % of pay that should be allocated for pensions, should NOT be what other Civil Servants get, but what is typical for Private Sector Taxpayers.
TL, you destroyed Teddy Steals so bad he is in massive hiding 🙂
March 8, 2012 at 9:26 pm
zzzzzzzzzzzzzzzzz yes I am hiding…zzzzzzzzzzzzzzzzzz
March 8, 2012 at 10:42 pm
One item to share with Tough Love and Rex the Wonder Smug – Public employees, Civil Servants or whatever you wish to call us, are entitled to ZERO% (0% for those who have to sound out the words) AND we also pay heavily into the pension system as well. It’s not just the 6% that most pay to get their 401K match. And Rex, if you think most of us are millionaires, I beg to differ. Your posts make you sound like much more of a man (?) with a severe case of pension envy (hope you sound that one out okay) than one who wants to truly look at the facts. I’ve stated it before, and I’ll state it once again for you… be careful what you wish on others out of spite, because once the precedent is set, who will be there to support you when they want to come for yours?
March 8, 2012 at 10:57 pm
Dale– Good points but the Poodle does not care– he/she hasn’t worked in years.
oooouch
March 9, 2012 at 12:55 am
Dale, I’m not sure why you say Civil Servants (like yourself) are entitled to ZERO % of pay towards you pensions.
What you ARE “entitled” to is equal Taxpayer-funded Total Compensation (pay + pensions + benefits) to your Private Sector counterparts. With most studies (Incl. the US Gov’t BLS Study) showing very close Public and Private Sector “cash pay”, there is then no justification for greater pension and better benefits.
But the taxpayer paid-for share of your pensions are ROUTINELY 2-4 times (six times for safety workers) greater in value at retirement than those of comparable Private Sector workers retiring with the SAME pay, with the SAME years of service, and with the SAME age at retirement. In addition, you generally get free or heavily subsidized retiree healthcare, (unheard of today in the Private Sector) often commencing at such young ages that a family cover benefit is worth close to $500K by age 65.
What make Civil Servants so deserving of greater pensions and better benefits at Taxpayer expense ? Are you “special” and deserving of more ?
We’re not stupid.
We realize how we have been ripped off
We’re determined to put a stop to it.
Your BS sways nobody.
March 9, 2012 at 1:39 am
Dale Says:
Public employees, Civil Servants or whatever you wish to call us, are entitled to ZERO% (0% for those who have to sound out the words) AND we also pay heavily into the pension system as well. It’s not just the 6% that most pay to get their 401K match.
You do not pay into the system at all in most cases, and the SMALL amount you do pay is less than 5% of the benefits you trough feeding piglets receive at age 50, where a $5-$10 million pension is common. Average trough feeder pension is $85K at age 55, average SS is $12K at age 67. Nuff said!
And Rex, if you think most of us are millionaires, I beg to differ. Your posts make you sound like much more of a man (?) with a severe case of pension envy (hope you sound that one out okay) than one who wants to truly look at the facts.
ALL of you clowns are millionaires, at a MINIMUM, as I stated, the GED educated cops and firewhiners are $5-$10 million millionaires. I know you probably failed math in HS, if you even graduated so I will leave it at this and not bother you with the facts you will fail to understand.
I’ve stated it before, and I’ll state it once again for you… be careful what you wish on others out of spite, because once the precedent is set, who will be there to support you when they want to come for yours?
I am praying and hoping for the day your ponzi scheme runs out, I am throwing a PARTAY! And you and Teddy Steals are invited. GED educated gov employees do nto deserve nor are the entitled to make more than medical doctors.
Hey Dale, take your SEIU trough feeder “talking points” to one of those purple shirt beach parties where some dork will buy it.
March 9, 2012 at 2:13 am
FYI Tom Saggau = labor union strategist, Christopher Platten – labor union lawyer. Take whatever they say with a grain of salt (make that a grain of the large, course-ground variety)!
March 9, 2012 at 2:27 am
Shane, The ONLY ones who support the status quo or who argue for only the most minor tweaking around the edges are either Civil Servants (active or retired), have family who are (or were) Civil Servants, or have a financial stake in maintaining the current system (Union lawyers, lobbyists, etc.).
Interesting how nobody but those riding this gravy train not only support, but often actively SEEK Tax increases. Why ? Because for each incremental $1 in taxes THEY will pay, they will get in back $5 which generally goes towards nothing other than supporting their outsized Pensions & Benefits.
March 9, 2012 at 5:51 am
I’m disappointed in reading some of the acrimonious comments about a legislator who has called for a State audit of a municipality’s finances…namely the City of San Jose. I’ve just read the mission of the California Joint Legislative Audit Committee, and it reads:
“The Joint Legislative Audit Committee is statutorily charged with ascertaining facts, and making reports and recommendations to the Legislature concerning the State, its agencies, departments and political subdivisions of the State. Independently and through the State Auditor, the JLAC investigates, studies, analyzes and assesses the financial practices and the performance of existing governmental and/or publicly created entities in California – in order to assist those entities in fulfilling the purpose for which they were created by the Legislature. In carrying out these duties, the JLAC reviews requests for audits from any of the 120 members of the Legislature, approves those requests that are a good use of the resources of the State Auditor and will provide important and relevant information to the Legislature and the people of California, and establishes priorities among the requests received and approved for audit.”
So, the request made and the action taken to approve the audit and its urgency seems entirely reasonable in light of the questionable numbers that have been raised about a serious issue to numerous people who have ‘life decisions’ at stake in the San Jose debate. It should also be a serious concern of those who are coming to the table to ask for concessions on behalf of the city. Either way, the truth serves both sides.
Without the investigative report that a local news organization broke, the subsequent Ethics Commission complaint filing, SEC complaint filing and lawsuit, the disgusting ‘negotiations’ process would have been swept under the rug.
Truth: The City would never provide the number targets, after repeated asks, of what savings they were trying to achieve from negotiations.
Truth: The Mayor kept hammering the media and public with a $650 million number that is untrue. By the way, per dictionary.com, a synonym for untrue is “lying.”
Truth: The City’s Retirement Services Director said in an interview with NBC Bay Area that the $650 million was “off the top of his head.” The Mayor also affirmed that he knew that number was off the top of the Retirement Services Director’s head. Unfortunately, the article above provides a Mercury News reference that suggests anything but the $650 million being a careless and flippant estimate.
Truth: Councilmember Pete Constant is drawing a disability retirement while serving on the City Council. Since he is drawing a disability retirement, sits as a non-voting member of both the Police and Fire, and Federated Retirement Boards, shouldn’t that constitute a conflict of interest? In fact, he should have recused himself from the vote on the pension reform ballot measure for those very reasons!
Truth: A coalition of some city unions, proposed a new employee retirement plan with lower benefits over a year ago. The ballot measure moving forward does not create the plan for new hires, so anyone who has been hired since that March 2011 proposal until such time as the City Council approves a new employee retirement plan (presumably after the ballot measure passes–if it does), they’re all being hired in at the current pension benefit level. That’s a year of could-have-had savings, had the city been truly committed to real pension reform.
Truth: The ballot measure is clearly intended to bind the hands of future City Councils. There is no need for a great deal of the ballot measure, because the solutions can be implemented through local ordinances rather than a Charter change. It is harder to change the Charter and doing so involves the expense of an election. That is not the case for ordinances and changes to them.
Truth: The City’s General Fund is now absorbing the obligations of the now defunct San Jose Redevelopment Agency. That is General Fund money no longer available for other uses (e.g. putting cops back on the street, opening libraries, etc.). So, it’s not all pension costs that are depleting the General Fund.
The ‘spin’ that I’ve read in various articles about San Jose’s pension reform situation tells me that many people who are watching do not understand the complexity of the issues involved. They seem to listen to their favorite commentator or read their favorite news site/paper and don’t question the facts. I would encourage everyone who has an opinion and the interest to become informed through your own research. Don’t believe everything you hear until you prove it to yourself.
True pension reform could be accomplished with two willing partners. But the city has not demonstrated its interest in being a willing partner or in solving the problem through negotiations. Rather, a City Council majority has a preference for a costly lawsuit!
March 9, 2012 at 6:42 am
Semperfi–thank you, for a rare, knowledgable post.
March 9, 2012 at 2:35 pm
Truth: “Semper Fidelis” is Latin for “Always Faithful” or “Always Loyal”
To the Unions of course, NOT to Taxpayers who pay the bills.
March 9, 2012 at 2:41 pm
Semper Fi– well said— and the sick icing on the cake is that the mayor lied about the most seemingly important fact. Very unsettling.
March 9, 2012 at 6:18 pm
For me, the cacophony concerning San Jose has made it impossible to understand WTF is really going on. Numbers like 30% or 50% of salary going into the pension fund are just way, way too much. On the other hand it does look like the public employees are working to some kind of compromise.
I still feel that some sort of structured default is likely. Interesting that >80% of Greek bond holders voluntarily accepted exchange of their bonds, implying a voluntarily loss of considerable principle.
I do think that California is headed for something very similar.
Now I do believe the mathematics is quite clear: $1 put in a defined benefit plan purchases a fair amount more retirement benefit than $1 in a defined contribution plan. There is a bit `insurance’ effect in DB plans where the early mortalities subsidize the late ones, while in a 401(k) DC plan everyone must plan to live to 95 or 100 and save a lot more money (or draw lower benefits at age 65). Additionally the big investment houses hate DB plans because they make fewer commissions.
I just wish we had not allowed too many benefits to be promised based on the too low contributions. Maybe soured the State of California on the whole concept of DB plans, which are inherently more economical.
March 9, 2012 at 9:30 pm
Spension, To a Civil Servant, the WORST-CASE “compromise” (for them) would STILL leave them with at least twice the pension of comparably situated Private Sector workers.
That’s why if Taxpayers want REAL, SUBSTANTIVE, change, it MUST be forced upon them. They will NEVER agree to necessary and fair reductions.
March 9, 2012 at 9:33 pm
Semper Fidelis = UNION SCHMUCK
March 9, 2012 at 10:34 pm
That’s right, Rex. Pull down the blinders. You don’t want any solutions. You just want to make sure that, “that other guy”, gives up, what he has that you don’t have, so that you can feel good, when he is as bad off, as you.
March 10, 2012 at 7:51 am
Seesaw: “blah…..blah….blah………………….”
Did I quote you right 😉
March 10, 2012 at 10:30 am
boy everytime i read dog boys comments it confirms his ignorance. bow wow to you fido
March 10, 2012 at 4:15 pm
Hi Teddy Steals sock puppet acocunt 😉
March 10, 2012 at 6:44 pm
So Shane Patrick Connolly , are you saying it is not true that Pete Constant, your employer, would no longer qualify for the disability pension he now collects monthly under the very plan he is now supporting?
March 11, 2012 at 10:32 am
“Tom Saggau Says:
March 8, 2012 at 3:47 pm
Those pesky Republicans on the Joint Legislative Audit Committee carrying the water of unions again…Seriously? The issue of pension reform is not the question, the issue of truth and lies is the issue.”
If that is the case then why were the SJ unions telling blatant lies about the cost savings of their pension proposal?
March 11, 2012 at 10:54 am
Semper Fidelis Says:
March 9, 2012 at 5:51 am
I’m disappointed in reading some of the acrimonious comments about a legislator who has called for a State audit of a municipality’s finances…namely the City of San Jose…. “
So, the request made and the action taken to approve the audit and its urgency seems entirely reasonable in light of the questionable numbers that have been raised about a serious issue to numerous people who have ‘life decisions’ at stake in the San Jose debate. It should also be a serious concern of those who are coming to the table to ask for concessions on behalf of the city. Either way, the truth serves both sides….Without the investigative report that a local news organization broke, the subsequent Ethics Commission complaint filing, SEC complaint filing and lawsuit, the disgusting ‘negotiations’ process would have been swept under the rug. ”
Just the unions using the bought democrats. Besides, the focus on the 650 is only a diversion from the true problem which is billions in unfunded liabilities, a funding ratio that suggests big problems – like rapidly escalating taxpayer contributions, and investment return assumptions that are very difficult to achieve. How is the SJ pension plan doing this year? Not so well, right?
How does the SJ plan justify paying a 13th check to retiree’s when the plan is so severly underfunded, just because the plan beat the assumed rate of return during a given year? Talk about pilfering the system – and then having the nerve to “expect” the taxpayers to pay more? That’s what the California Joint Legislative Audit Committee should be looking into, and maybe the Attorney General also.
Fairness seems to be a one way street on San Jose’s Union Blvd.
March 11, 2012 at 2:31 pm
Christopher E. Platten Says: “The offers made by labor organizations provided tens of millions of dollars in guaranteed savings. In addition, unlike most other plans, the City’s refusal to consider extension of the amortization period of its pension liabilities helps create the spectre of an unsustainable crisis, where one can be avoided. For example, most plans operate under a amortization period of 25-30 years, where San Jose is much shorter at 16-20 years.”
Now we’re getting somewhere. The union’s big press conference was all about how they were going the extra mile to help the city and taxpayers by stepping up and offering real “savings” to the city. Here is their press release:
“5 San Jose Unions Propose $467 Million in Pension Savings to City
PR Newswire
Sept. 27
SAN JOSE, Calif., Sept. 28, 2011 /PRNewswire/ — 5 San Jose unions representing San Jose police officers, firefighters, architects and engineers, middle managers, and maintenance supervisors will unveil a pension reform plan that provides the City with nearly a half billion dollars in reduced pension costs over the next five years.
CONTACT: Tom Saggau, +1-408-209-6813
SOURCE San Jose Firefighters, Local 230”
March 11, 2012 at 2:34 pm
Christopher E. Platten Says: “In addition, unlike most other plans, the City’s refusal to consider extension of the amortization period of its pension liabilities helps create the spectre of an unsustainable crisis, where one can be avoided. For example, most plans operate under a amortization period of 25-30 years, where San Jose is much shorter at 16-20 years.”
What the San Jose Police, Fire Department, and other unions are calling 467 million in “savings” really amounts to debt deferral, which isn’t really savings at all. It is only longer payment terms which allow for reduced payments at higher overall long term cost. That, in a nutshell, is what they call a solution. Mayor Reed made the correct decision by rejecting this flawed proposal.
Essentially the unions wanted to alter their plan to more closely resemble the CalPERS plan or switch to CalPERS outright. By switching to CalPERS there would be several million per year in reduced plan administration costs due to economies of scale. But the real “savings”, as they call it, would come from smoothing unfunded liabilities over 15 years (currently 5) and extending the amortization period to 20-30 years (currently 16-20) with increased corridors for the 2007-09 market losses. Their plan was to defer debt – and sell the idea of lower payments as a cost savings.
This is a good time to quote pension expert Girard Miller (Pink Slips and Pension Red Ink):
“How high will this flood crest? Local employers are now skeptical that they have been told the full truth about how high their pension costs will ultimately surge. Unlike the vast majority of public pension funds, CalPERS uses a 15-year actuarial smoothing process that camouflages the genuine economic impact of market fluctuations. I have no issue with normal industry-standard actuarial smoothing periods of 5 years, in light of the average length of a business cycle — which is 6 years based on 14 recession cycles in the past 84 years. But the CalPERS process is opaque and flunks the transparency test that taxpayers, public managers and municipal bond investors are entitled to expect. As I have explained before, such extraordinary “smoothing” practices deserve SEC investigation as an “artifice and device” to conceal relevant financial information from the investment community — as well as the employers who must now bear the financial brunt of unsustainable pension benefits….Those that amortize their liabilities over periods exceeding the employees’ remaining average service periods should also provide projections using intergenerationally accurate periods, such as 15 years.
http://www.governing.com/columns/public-money/Pink-Slips-and-Pension-Red-Ink.html
Mr. Miller also reaffirms those statements in an excellent column from this week: Pension Reform: Stop Billing the Grandkids: Intergenerational equity in retirement plans is long overdue.
http://www.governing.com/columns/public-money/col-Pension-Reform-Stop-Billing-the-Grandkids.html
March 11, 2012 at 2:50 pm
Spension, Joe Nation and the Stanford Institute for Economic Policy Research provide an excellent graphical representation of San Jose’s pension plans and compare them to CalPERS. It provides a quick view of some eye popping/jaw dropping numbers. Now I understand why the unions are continually trying to discredit the research:
Click to access SIEPR_SJPension08222011.pdf
March 11, 2012 at 4:36 pm
The first thing we look at in any study is—– of course—– who paid for it? Is it biased?
Wow— Nation and the stanford college students again! The assumptions, discount rates, editorial side comments about mortgages, deltas, and general understanding of negotiated compensation and who pays for it are stunning.
Another waste of paper from the bay area! LOL These things are debunked as fast as they are published– but the grant money flows on! LOL God Bless ya Cappy!
March 11, 2012 at 6:45 pm
The first thing we look at in any study is—– of course—– who paid for it? Is it biased?
Go home trough feeder, you’re scam is finished. Jig is up! When Stanford crushes you, then YOU KNOW it is all over.
March 11, 2012 at 11:54 pm
Poor poodle can’t stop thinking about me….mmmmmm…….I should charge rent for all the time I have camped out in his tiny head…..mmmmmmmmmmmmmmmmmm
March 12, 2012 at 5:11 am
Where do you want my rent check sent Teddy Steals?? I feel bad not paying you for destroying your spin here…. BAM!
🙂
March 12, 2012 at 1:38 pm
Actually, the Stanford/Nation report that Captain refers to presents a range of assumptions that includes those used by CalPERS. It also uses the `risk free’ rate, with a certain justification…. namely, that the taxpayer does back up the pension fund to make it risk free. Personally, using the risk free rate to set the service credit multiplier (1% per service year or 2.5% or whatever) would have made since to me, years ago. Wasn’t done because we’ve had bull markets since 1980 or so. And so here we are… in a severe downturn expecting the taxpayer to make up for the market fluctuation down.
Sure, I know that the market was crashed by criminal behavior, in part. Twas ever thus, however… if you depend on thieves, you can expect thievery.
Greece here we come.
March 12, 2012 at 4:00 pm
spensions– the stanford class project presents a range of assumptions but is loaded with biased language betraying the authors bent. “thieves” ?— what are you talking about? Are you one of these fringe guys who sees a “specific intemnt” from a legal point of view? If so, how do you sqyaure THAT legal view with all of the other legal/constitutional points that don’t go your way? Hmmmm
March 12, 2012 at 4:46 pm
Ted – the data in the SJ report is from CalPERS and San Jose’s own independent actuarial report (the actuary hired by the union pension board). The different rate assumptions were done by the author’s of the report, I assume, but that is just math that you can verify if you like.
You would know that if you actually looked at the report.
March 12, 2012 at 4:48 pm
read it Cap– hook line and sinker….
March 12, 2012 at 4:58 pm
Ted – the data in the SJ report is from CalPERS and San Jose’s own independent actuarial report (the actuary hired by the union pension board). The different rate assumptions were done by the author’s of the report, I assume, but that is just math that you can verify if you like.
You would know that if you actually looked at the report.
Cap, Teddy Steals has the brain power of a third grader-don’t expect him to be able to fight back 😛
March 12, 2012 at 5:01 pm
wow Poodle– that was a mature and useful comment.
March 12, 2012 at 5:02 pm
Cap– were you going to answer my questions about your use of the word thieves?
hmmmm
March 12, 2012 at 6:10 pm
Cap, you cannot fight a war of knowledge with teddy Steals, he is unarmed 🙂
March 12, 2012 at 7:23 pm
unarmed? or well armed? Hmmmm one things for sure—– I LIVE in the poodle’s tiny brain cavity! mmmmmmmmmmm
LOL
March 12, 2012 at 7:38 pm
“Ted Steele,– it’s so cozy up here in poodle’s tiny head! Says:
Cap– were you going to answer my questions about your use of the word thieves?
hmmmm”
I think you’re confused. It was spensions that used the word “thieves”. I do agree with him though.
Rex, I know. I just want the irrelevant one to know I know. Keep up the good work! Also, I suspect the “little old lady with the meager pension” – seesaw, is really a union wolf in sheeps clothing.
March 12, 2012 at 8:03 pm
Sorry—Cap—–
I guess spension wants to ignore the challange——feel free to take it up and explain the legal use of the word theft in this context! That is of course without your usual sov. default nonsense!
IO
March 12, 2012 at 8:19 pm
Also, I suspect the “little old lady with the meager pension” – seesaw, is really a union wolf in sheeps clothing.
I wouldn’t doubt it, seesaw is on EVERY blog in CA that has pension issues! LA Times, Sac Bee OCR, San Diego UT, you name it she is there spinning;
http://www.calwatchdog.com/2012/03/09/special-series-municipalities-look-to-bankruptcy/
March 12, 2012 at 10:15 pm
“Rex The Wonder Dog! Says: I wouldn’t doubt it, seesaw is on EVERY blog in CA that has pension issues! LA Times, Sac Bee OCR, San Diego UT, you name it she is there spinning”
Maybe she is really David Low in textual drag. Seesaw was very annoyed when I referred to this grand Union Poo-Bah as David Louie, and david Lowe.
March 13, 2012 at 1:49 am
The thieves run Wall Street. Yes they crashed the market with SIVs, CDSs, CDOs, various derivatives, etc. Yes, twas ever thus. Depending on the returns of the thieves of Wall Street is and was a risky business… but we all do it, including me in my DC plan. Even parts of my own investment portfolio.
That thieves run Wall Street is why Social Security invests in US Treasuries exclusively. And also why SS payments are capped at about $30,200/year right now, although the contribution rate is right now 10.4% up to $110,100 of income.
Yes, I do think we are headed either for a Greek solution… where retirees are pressured to give up pension benefits (possible through the tax code, which wouldn’t be voluntary), or , worse, a messy unstructured California sovereign default.
March 13, 2012 at 2:05 pm
spension– well you are partly correct– and twas not ever thus…the reason the fund invests primarily in nonmarketable debt is because the SS act forbids prefunding by investment. The plan was for investment in publicly held debt.
Remember– The Nostre was a ship of swank as gallant as they come,
Until she hit a mine and sank, just off the coast of Somme.
Think about it.
March 13, 2012 at 5:55 pm
I think Wall Street twas ever criminal, and continues to be. Expect a bumpy ride… the new twist in the last 30 years was expecting taxpayers to fill in the divots.
Nobody in 1930’s America was going to allow investment in stocks for Social Security after 1929. I certainly have relatives who only invest in Treasuries, to this day, although only one or two left living.
As far as I know, the US has never defaulted, so far. Our Captain Rock, maybe to perish later.
March 13, 2012 at 6:03 pm
the reason the fund invests primarily in nonmarketable debt is because the SS act forbids prefunding by investment.
hahhahahaha…….more spin from the dork….. man, this is comical! 😉
March 13, 2012 at 6:56 pm
I think Wall Street twas ever criminal, and continues to be. Expect a bumpy ride… the new twist in the last 30 years was expecting taxpayers to fill in the divots.
Actually the last 15 years, watch this video;
http://billmoyers.com/segment/david-stockman-on-crony-capitalism/
March 13, 2012 at 8:16 pm
spension– I can’t disagree with the concept that there are some crooks there for sure, but my info about the SSA and the pay as you go investment proscriptions with no front loading is verbatim from the SSB and act itself.
March 14, 2012 at 12:48 am
Ted Steele, ? Seems to me there is a Social Security Trust Fund, which in most people’s opinion is pre funding with treasuries. Course some people decry the lending out of SS payments back to the US government which pays interest… but it is no different than purchasing treasuries, like China does and like I used to (before the rates fell so low).
March 14, 2012 at 2:11 pm
the prohibited pre funding is securities—– that was the drafters envisioned. Remember— it is a designed pay as you go system.
March 14, 2012 at 3:19 pm
Huh? Social Security is by no means 100% pay as you go. It is partially pay as you go, sure… the early beneficiaries got way more than they contributed. And Social Security has a redistribution aspect… low salary contributors get subsidized by high salary contributors.
However, there is a Social Security trust fund, currently with about $2.5 trillion in it:
http://www.ssa.gov/oact/ProgData/assets.html
invested in…. **securities**, in this case….
http://www.ssa.gov/oact/ProgData/fundFAQ.html#n2
For example, In my 37 year working career (so far), I’ve contributed about $400,000 to Social Security… with the interest from the treasury securities they were invested in, perhaps that has grown to $600,000 or so… if I retire at 67 and live 18 years (the average) I’ll get back about $540,000.
Pay as you go… that is military pensions in the US.
March 14, 2012 at 9:08 pm
missed my point amigo—- Have a look at the first bill and legislative intent—- pay as you go. Why this is important is because of your original point about the funds’ investments and my follow on comment about non marketable debt in the original design—- What happened to the SSA later in ’68 and again in ’73 amounts to a modification that loaded it up some but fully violative of the original schema.
March 15, 2012 at 12:04 am
When I read the 1935 act…
http://www.ssa.gov/history/35actii.html
there is no mention of pay-as-you-go… in fact provision is made right up front for investing a reserve in public securities, with a 3% interest rate paid by the US government.
Seems like pre-funding to me!
March 15, 2012 at 2:08 pm
the reserve only and with a cap all added in ’72— pay as you go is all over the legislative intent docs….
March 15, 2012 at 3:27 pm
http://www.ssa.gov/history/35actii.html
“OLD-AGE RESERVE ACCOUNT
Section 201. (a) There is hereby created an account in the Treasury of the United States to be known as the Old-Age Reserve Account hereinafter in this title called the Account. ”
Gosh, nothing about pay-go there. I don’t see pay-go `all over’ anything.
March 15, 2012 at 6:27 pm
lol—- of course it’s a pay go or pay as you go– maybe not a pure one– but — in fact it is probably used as an example of that more that any other system in the world.
An important example of such a PAYGO system in this second sense is Social Security in the U.S. In that system, contributions are paid by the currently employed population in the form of the Federal Insurance Contributions Act tax (FICA), while recipients are mostly individuals of at least 62 years of age. Social Security is not a pure PAYGO system, because it accumulates excess revenue in the Old-Age, Survivors, and Disability Insurance Trust Funds (OASDI).
Now one may more properly call it a pay benefit system but it is generally nearly the same thing.
Do you usually argue over things just to argue? lol
March 16, 2012 at 7:04 pm
No, don’t argue just to argue. I’d point out that you changed your position… now you point out that SS accumulates revenue in the
OASDI trust. Initially you said that was forbidden. Laugh all you want, but you initially got it wrong.